MonitorsPublished on Aug 01, 2019
Energy News Monitor | Volume XVI; Issue 7


Oil News Commentary: June - July 2019


Growth in India’s demand for gasoline and jet fuel is expected to slow slightly this as prospects for world trade deteriorate. Overall demand will remain at 4 percent to 4.5 percent. Still, the growth rate could be lowest for the country since fiscal year 2013-2014, according to government data, a sign that demand in India, one of the two pillars driving global oil consumption growth other than China, is slowing. The IEA has revised down its 2019 oil demand growth estimate by 100,000 barrels to 1.2 mn bpd due to the worsening prospects for world trade, although stimulus packages and developing countries should boost growth going into 2020. Demand for gasoline and jet fuel demand is expected to rise by 7-8 percent this year down from rates of 9-10 percent in the previous year. Diesel consumption could increase by 3 percent this year. The country’s plans to add smaller airports to improve domestic transport systems will drive appetite for jet fuel. India could increase fuel imports slightly during the refinery shutdowns. IOC, along with other refiners in India, have halted Iranian oil imports because of US sanctions. IOC, which has term contracts with US oil sellers, is also open to buying more spot cargoes but this will depend on economics.

Decline in consumption of LPG by 7 percent in June 2019 pulled down India’s overall fuel consumption for the month by 2 percent to 17,678 tmt, as compared to 17,981 tmt recorded in the corresponding month a year ago. LPG demand in the same month declined to 1,794 tmt as compared to 1,931 tmt recorded in the corresponding month a year ago. This would be the first year-on-year decline in LPG consumption after November 2018. Moreover, LPG demand in the first quarter (April-June) of financial year 2019-20 declined by 1.5 percent to 5,753 tmt as compared to 5,843 tmt recorded in the corresponding quarter a year ago.

Sale of diesel is going down continuously in Rajasthan owing to increasing diesel prices. It is now most expensive in north India after increase in 4 percent VAT. Earlier, diesel was most expansive in Srinagar of Jammu and Kashmir. Despite increasing number of vehicles, the state is witnessing negative growth in sale of diesel every year. The diesel dealers in the state attributed it to the increasing VAT in the state which makes diesel expensive in comparison to neighbouring states, especially Uttar Pradesh. According to the figures provided by Rajasthan Petrol and Diesel Association of prices, diesel is most expensive in Jaipur in comparison to capital cities and other major cities of north India states. In Jaipur, diesel was sold at Rs71.24/litre, while in Srinagar it was sold at Rs70.4 per litre. However, in Lucknow, it was sold at Rs65.62/litre, Chandigarh sold it at Rs63.46/litre and in Gurugram, it was available at Rs65.81/litre. In Noida and Ghaziabad, it is sold at Rs65.72 and 65.59/litre. In Delhi, it is Rs66.69/litre. Prices of diesel in Jalandhar, Ambala and Jammu remained at Rs65.51, 65.45 and 67.45/litre, respectively.

Fuel prices were revised across the country, a day after the announcement of additional excise duty and cess of Rs1/litre on petrol and diesel. In Delhi, petrol is being sold Rs2.45 higher at Rs72.96/litre and diesel at Rs66.69/litre after a Rs2.36 hike. In Mumbai, petrol is being sold at Rs78.57 while in Kolkata it is retailing at Rs75.15, higher by over Rs2/litre.

The Railways owes oil companies more than Rs10 bn in diesel bills. Bills amounting to Rs13.84 bn were being processed for payment currently. It owes IOC Rs10.37 bn, BPCL Rs1.54 bn, HPCL Rs615.3 mn, RIL Rs1.15 bn and Nayara Energy Rs159.6 mn. The railways had earmarked Rs221.79 bn for diesel traction in budget estimate 2019-2020.

BPCL has bought gasoline for Kandla in a rare move to meet demand and plug a supply gap after cancelling an earlier purchase tender. BPCL bought 20,000 tonnes of 91.2-octane grade gasoline at a premium of about $9 a barrel to Singapore quotes on a cost-and-freight basis. The fuel is of Euro IV-compliant grade and scheduled for 18-22 July arrival at Kandla port located in Gujarat state of western India. BPCL had previously cancelled a tender to buy 35,000 tonnes of gasoline for 20-24 June arrival at Mumbai but the reasons were unclear. India is undergoing heavy refinery maintenance this year as the country prepares for cleaner fuels from April 2020.

IOC is expanding its fuel storage capacity in Asanur on Chennai-Trichy highway, to meet the rising demand. Southern markets of Tamil Nadu are being fed from terminals at Sankari, Trichy, Madurai and Coimbatore. While Coimbatore is connected with the Bharat Petroleum’s Cochin-Coimbatore-Karur Pipeline, other 3 terminals are fed by IOC’s Chennai-Trichy-Madurai Pipeline, which has a booster station at Asanur with a line branching off to Sankari Terminal. The state owned fuel retailer is also augmenting the storage capacity of its bottling plants across the state to gear up for the rising demand LPG. Around 6,000 tonnes of storage is being added across Ennore, Puducherry, Trichy, Madurai and Erode bottling plants.  Adding all this, total value of all the ongoing and proposed projects in Tamil Nadu bottling plants is around Rs 2.6 bn. Current LPG storage capacity across the bottling plants in the state is about 14,000 tonnes which includes 1,800 tonnes of Tirunelveli bottling plant which is yet to be commissioned. With this capacity IOC will be capable of rolling out about 2,65,000 cylinders per day adding up to an annual bottling capacity of 940 thousand tonnes per year. As India moves to BS VI grade auto fuels from Grade IV, IOC will take up the preparatory works to market BS VI grade automotive fuels at its retail outlets from January.

A threat by IOC to stop jet fuel supplies to Air India at some airports was resolved after a late intervention from the ministry. The state-run refiner threatened to stop supplies at six airports, including Pune, Vizag and Chandigarh, due to payment defaults by the airline. The cash-strapped airline has been struggling to make payments. It had a debt of more than Rs540 bn last year when the government tried to sell a 76 percent stake in the airline.

The Road Transport and Highways Ministry is considering a plan to raise money from fuel stations located along the expressways by levying a commission on every litre of petrol or diesel sold. The move comes after the road sector lost its exclusive rights to use the erstwhile road cess at a time when it faces the daunting task of building roads under the Bharatmala project, the cost of which run into several crores. The government plan to double the number of petrol pumps in the country does not make economic sense as more number of outlets would only cut into each other's sale, leading to some becoming unprofitable, CRISIL Research said in a report. The three public sector oil marketing firms IOC, BPCL and HPCL - in November last year advertised to open 78,493 more petrol pumps in the country. This on top of 64,624 fuel retail outlets currently operating in the country. As the addition of pumps will also be followed by closures where throughputs are not at sustainable levels, private players are expected to effectively add 7,500-8,000 petrol pumps till fiscal 2030, based on their plans and the pump licenses they hold. Of the 78,493 petrol pumps planned, about 68 percent belong to the regular category (highway and urban areas), and the remaining 32 percent is in rural areas.

A proposal to snap supply of kerosene to ration card holders having electricity and cooking gas connections was opposed in the Rajya Sabha, with a member saying it would severely impact fishermen who use the fuel to fire their boats. In Kerala, more than 8.5 mn ration cardholders have power connections. Only 60,128 families have no cooking gas or power connections. At present, ration cardholders who do not have power connection are provided with 4 litres of kerosene at subsidised rates. The move by the Union Ministry of Petroleum and Natural Gas is based on the premise that subsidised kerosene is to be used only for cooking and lighting purpose. But this would adversely impact fishermen who use kerosene in their fishing boats.

According to the government, India saved cooking gas or LPG subsidies of the order of Rs590 bn in five years since 2015 due to the implementation of the direct benefit transfer scheme PAHAL that allowed elimination of fake or inactive connections and reduced leakages apart from the “Give It Up” campaign that urged well-to-do consumers to surrender gas connections. The government has been able to eliminate 42.3 mn duplicate, fake and inactive LPG connections while the “Give It Up” campaign resulted in 10.3 mn PMUY beneficiaries, who were above the poverty line, giving up their respective subsidies, according to the Union budget documents. The PAHAL scheme for direct transfer of LPG subsidy was launched in 54 districts across the country in November 2014. It was later extended to the rest of the country in January 2015. Under the Scheme, LPG cylinders are being sold at non-subsidised price and subsidy, if eligible, is being directly transferred to the consumers’ bank account. Around 247.2 mn LPG consumers have joined the scheme so far. The government also managed to save an additional Rs82.65 bn up to April 2019 on subsidized kerosene due to staggered increase of retail selling price by Rs14.73/litre. The government has been trying to cut down kerosene usage by gradually increasing the prices and decreasing the fuel’s allocation to states. The centre’s allocation of PDS Kerosene to states dropped 28 percent in 2017-18. Similarly, a reduction of 12 percent was aimed for 2018-19. The allocation for the first quarter of the current financial year has also been reduced by 12 percent.  Notwithstanding these claims a CAG report on savings from LPG schemes has attributed most of the savings to the fall in crude oil prices rather than the effectiveness of subsidy schemes.

Household LPG bill will go down by Rs100.50 for each refill and the effective payout will come down to Rs494.50 after adjusting the subsidy from the government due to softening prices in the international market and a favourable dollar-rupee exchange rate. According to the country’s largest fuel retailer IOC the price of unsubsidised domestic LPG cylinder will come down to Rs637 from Rs737.50. The government will transfer Rs142.65 as subsidy directly into the bank account of the consumer for each cylinder. The reduction comes a month after nearly 4 percent increase in the price, amounting to an increase of Rs25 per cylinder. The international prices and rupee exchange rate have a lag before taking effect. The government subsidises 12 cylinders of 14.2 kg each per household in a year. For any additional purchases, the consumer has to bear the market price. The extent of the subsidy varies from month to month, depending on changes in the average international benchmark LPG prices and foreign exchange rate.

The Petroleum Ministry has increased the commission for distributors of LPG by Rs11.26 for every 14.2 kg cylinder and Rs5.63 for every 5 kg cylinder, effective 1 August. This is the steepest hike in seven years and will be implemented in phases over three months ending 1 October this year. The hike is based on the recommendations of a study for revision in LPG distributors commission conducted by Indian Institute of Management, Ahmedabad in consultation with the oil ministry’s statistical arm PPAC. Post the revision, the commission will rise to Rs61.84 kg for each 14.2 kg cylinder and Rs30.92 for a 5 kg cylinder. The commission will be hiked first by 50 percent or Rs5.62 per kg for 14.2 kg cylinder on 1 August followed by a 25 percent hike or Rs2.82 on 1 September and finally by 25 percent on 1 October. The hike in case of 5 kg cylinders will follow the same timeline and percentage revisions. The country had 23,737 dealerships at the end of April 2019. Uttar Pradesh houses the most number of LPG distributors at 4,052 followed by 2,134 in Maharashtra, 1,799 in Bihar, 1,567 in Tamil Nadu, 1,450 in Madhya Pradesh and 1,333 in Rajasthan.

India’s crude oil production in May this year fell 7 percent to 2.8 mt due to fall in production from fields operated by ONGC, OIL and private operators. The fall in domestic crude oil production pushed the country’s crude oil import dependence to 85 percent in the month as compared to 83.8 percent recorded in the corresponding month a year ago. ONGC invited private participation to help the company boost hydrocarbon production from 64 nomination marginal fields. Cumulatively, domestic crude oil production decreased 7 percent to 5.519 mt during the first two months (April-May) of the current financial year (2019-2020), as compared to the corresponding period a year ago. ONGC’s crude oil production in May fell more than 4 percent to 1.760 mt. Cumulatively the company’s domestic crude oil production in the first two months of the present financial year fell 5 percent to 3.450 mt. According to the oil ministry, major reasons for lower production were less offtake by consumers in Tripura, Cauvery and Rajahmundry. OIL, the second government-owned oil and gas explorer posted a 4 percent fall in its oil production to 274,000 t. Cumulatively, the company’s crude oil production during the first two months of the current financial year dropped 4 percent to 539,000 t. The major reasons for the slippage was less than planned contribution from work over wells and drilling wells. Crude oil production from private players and joint ventures fell 13 percent to 767,000 t during the month of May. Cumulatively production by this segment dropped 12 percent to 1.529 mt during the first two months of the current fiscal. The drop in production is attributed to lower production from Cairn Oil and Gas fields in Mangala, Bhagyam, Aishwariya and Raageshwari Deep Gas due to operational issues and delays.

Oil and gas output from Indian assets overseas is roaring while domestic production is on a decline. Indian oil companies’ share in production from the overseas oilfields rose two-and-a half times in five years to 24.7 mtoe in 2018-19. In the same period, local production fell 6 percent to 67.1 mtoe. Investments in producing assets in Russia and the UAE in recent years have primarily led to the spike in overseas production, according to ONGC Videsh Ltd, the overseas arm of ONGC that is mandated to scout for investment opportunities overseas as part of India’s energy security strategy. A participating interest in foreign oilfields gives Indian companies the ownership of the oil and gas produced from such fields in proportion to their stakes. But Indian companies rarely get their share of produce to India since it is uneconomical to ship that from far-off oilfields. But such investments act as a financial hedge for the country when oil prices rise. In some cases, though, companies do carry home their share of oil such as in the case of UAE’s Lower Zakum Concession where ONGC, IOC and BPCL together purchased 10 percent stake last year.

The government’s latest plan to reduce stake in select state-run companies including oil and gas firms could be credit negative for IOC, BPCL and OIL rating agency Moody’s Investors Service said in a report. According to the rating agency, a change in policy along with Rs1.1 tn disinvestment target indicate that the government’s direct ownership could fall below 51 percent in the state-owned oil companies - ONGC, IOC, BPCL and OIL, who had a market capitalization of Rs4.5 tn as on 5 July 2019. Analysts said that reducing stake in state-owned oil and gas Public Sector Undertakings may leave less room for these companies to divest their cross-holdings. The government wants ONGC to sell its golf courses in Ahmedabad and Vadodara in Gujarat, sending the company into a tizzy as one of them has two producing oil wells. A recent exercise by DIPAM to assess land banks and other non-core assets of government departments as well as central PSUs identified two of ONGC’s golf courses in Ahmedabad and Vadodara, as also a sports club owned by BPCL in Chembur, Mumbai. The exercise identified only properties with real estate potential in prime cities while leaving out golf courses ONGC has in Ankleshwar in Gujarat and Rajahmundry in Andhra Pradesh. It also did not prioritise the grand golf course OIL has in Assam and one ONGC has in the North-East. While the golf courses are used by executives of the PSUs for playing the leisurely game and hosting their business partners, ONGC had built the one in Ahmedabad after it struck oil in the city more than two decades back. After the Motera field was discovered in Ahmedabad, ONGC was wary of encroachment around the oil wells in a city that was developing into a megapolis. The golf course identified by DIPAM has two producing oil wells. The field exists in a nomination block that according to rules ONGC cannot sell off or farm-out to outsiders.

According to MoPNG, ONGC will neither be disinvested nor privatised but only oilfields discovered by it are being monetised through a transparent bidding process to ensure the country’s energy security.  In a transparent bidding process, the government is keeping some of the discovered oilfields of ONGC on a public domain based on a criteria which will produce more and pay higher to the government, he said. At a time when India is importing 80 percent of its crude oil requirement, there is a need to monetise natural resources. The government is not privatising the ONGC but adopting a new model wherein both public and private players can participate in oil production.

MRPL has made its first purchase of US produced Thunder Horse crude oil via a tender for mid-October delivery. The refiner placed an order to buy 1 mn barrels of the sour oil. The deal comes as Indian refiners ramp up purchases of US oil to compensate for the loss of Iranian oil supplies as Washington tightens sanctions on Tehran. The widening spread between Brent and West Texas Crude prices is also providing a boost to Asian refiners looking to buy US oil. MRPL, which used to be Iran’s second-biggest Indian oil client, operates a 300,000 bpd coastal refinery in the southern Karnataka state. The Thunder Horse deal is the firm’s second purchase of US oil following a shipment of high-sulfur Southern Green Canyon oil received in February 2018. Meanwhile MRPL units are operating normally at the Karnataka refinery, where crude processing was curtailed due to water shortages in early May.

IOC is close to chartering a Panama-flagged ship rather than an Indian vessel in its first tender to hire an oil tanker with scrubbers that remove sulphur emissions. In December last year, IOC issued a global tender and offered Indian shippers a first right of refusal as the nation seeks to boost its shipping industry. India, the world’s third biggest oil importer, wants to promote the market share of its vessels in bringing in crude imports. But it is the Panama-flagged very large crude carrier Bright Pioneer, owned by Nissen Kaiun Co Ltd, that has emerged as the likely winner for a daily rate of $30,000-$32,000. Indian companies, including SCI, Great Eastern and Seven Island Shipping participated in the IOC tender. IOC will be using Bright Pioneer from January for at least five years, giving its Singapore-based operator Global United Shipping Company a period of six months to install the scrubbers. The duration of the IOC contract can be extended by another two years to a total of seven.

OIL, the country’s second-largest state-owned petroleum explorer, has floated a tender seeking technology partners for ramping up production from two of its old and ageing fields in Assam and Rajasthan. The partner is expected to enhance output from the marginal fields including Digboi in Assam and Baggitibba in Rajasthan with total in-place hydrocarbon volume of around 49 mt of oil equivalent. The new technology partner will infuse a new & appropriate fit for technology to increase the production and a notice inviting the offer is available at the company’s e-tender portal. The offer is valid till 20 December 2019. OIL has started the process to sell its 50 percent stake in Project License-61 in Russia as the performance of the asset didn’t meet expectations. The company has not yet decided to exit from its shale assets in the US.

Cairn Oil & Gas, a vertical of mining Vedanta Ltd, has stopped paying for its share of royalty on oil produced from its Rajasthan block following differences with partner ONGC on cost recovery. As much as $400 mn of royalty dues since July 2017 have not been paid to ONGC. ONGC is the licensee of the Barmer block in Rajasthan, home to India’s biggest onland oil discovery to date, and is responsible for payment of royalty at the rate of 20 percent of the oil price on the entire output from the field irrespective of its stake. However in 2011, when ONGC gave its nod to Cairn being taken over by Vedanta, it was agreed that the two partners would pay for royalty in proportion to their share -- so Cairn was to pay for royalty on its 70 percent share of oil and ONGC on 30 percent. The government had a few years back allowed exploration for oil and gas within an area that already has an oil or gas discovery and has been earmarked as production area.

Rest of the World

US crude oil production will rise to an all-time high of 12.36 mn bpd in 2019 from a record high of 10.96 mn bpd last year, the EIA’s STEO said. The latest July output projection for 2019 was up from EIA’s 12.32 mn bpd forecast in June. EIA also projected US petroleum and other liquid fuels consumption would rise to 20.70 mn bpd in 2019 from 20.45 mn bpd a year ago. The 2019 demand projection in the July STEO report was up from EIA’s 20.64 mn bpd forecast for the year in June.

Surging US oil output will outpace sluggish global demand and lead to a large stocks build around the world in the next nine months, the IEA said. The forecasts appear to predict the need for producer club OPEC and its allies to reduce production to balance the market despite extending their existing pact, forecasting a fall in demand for OPEC crude to only 28 mn bpd in early 2020. The demand for OPEC crude oil in early 2020 could fall to only 28 mn bpd, it said, with non-OPEC expansion in 2020 rising by 2.1 mn bpd — a full 2 mn bpd of which is expected to come from the US. At current OPEC output levels of 30 mn bpd, the IEA predicted that global oil stocks could rise by 136 mn barrels by the end of the first quarter of 2020. The IEA said that markets were concerned by escalating tension between Iran and the West over oil tankers leaving the Gulf but that incidents in the region’s shipping lanes have been overshadowed by supply concerns. Tightened US sanctions on Iranian crude drove down Tehran’s June exports by 450,000 bpd to 530,000 bpd, near three-decade lows.

A year-old bottleneck of crude in West Texas is shifting east as new pipelines prepare to begin operations without enough connections or storage for the smooth movement of shale oil to a US Gulf Coast export hub, according to traders and analysts. The US exported a record 3.8 mn bpd of crude in late June after Congress lifted a 40-year export ban in late 2015. New oil pipelines typically are quick to fill as producer commitments and connections allow. However, at least one of the new lines, owned by EPIC Crude Pipeline LP, does not yet have all the connections and storage to handle the full 400,000 bpd capacity.

Iran has accused the US of using sanctions to “shock” the global oil supply and gain market clout for its booming shale oil production. New technology that allows for extracting oil and gas from shale rock formations has led to a boom in oil production in the US in recent years. According to US figures, shale oil’s breakeven cost can be as low as $40 per barrel. The US is currently the world’s biggest oil producer followed by Russia and Saudi Arabia, and is set to become a net exporter from 2021, according to the IEA. The White House said in April that tightening sanctions on Iran will have “no material impact” on oil prices given the large supply of US oil on the global market.

Saudi Arabia has pumped 9.782 mn bpd in June, OPEC said, up from 9.67 mn bpd in May. The world’s top oil exporter kept its crude production below its output target of 10.3 mn bpd under an OPEC-led global oil reduction pact, to reduce inventories and support prices. OPEC and its allies led by Russia agreed to extend oil output cuts until March 2020, as the global economy weakened and US production soared. Saudi Aramco has awarded 34 contracts with a total value of $18 bn for engineering, procurement and construction projects at its Marjan and Berri oilfields, the company said. Aramco plans to boost production capacity at the two fields by 550,000 bpd of Arabian crude oil and 2.5 bn standard cubic feet a day of gas, the company said. The company’s maximum sustained oil output capacity is currently 12 mn bpd. Saudi companies account for 50 percent of the awarded contracts in a bidding process that involved more than 90 companies and institutions. The offshore oilfield development project aims to increase the Marjan Field’s production by 300 thousand barrels of oil per day of Arabian Medium Crude Oil, process 2.5 for bn standard cubic feet per day of gas, and produce an additional 360 thousand barrels of oil per calendar day of ethane. Aramco plans to add 250,000 barrels of Arabian Light Crude per day from the offshore Berri oilfield.

Russia became the largest crude oil supplier to China in May, supported by robust demand from private refiners and alongside a fall in supplies from Iran. Imports from Russia came in at 6.36 mt in May, or 1.50 mn bpd data from the General Administration of Customs showed. On a bpd basis, imports were up 4 percent from a year ago, but were flat versus April when China’s total crude oil imports hit a monthly record. For the first five months of the year, shipments from Russia were 30.54 mt or 1.48 mn bpd, up 9.8 percent from a year ago, data showed. Iranian supplies to China fell to 254,016 bpd in May from 789,137 bpd in April and 763,674 bpd a year ago. Chinese oil majors Sinopec and CNPC skipped Iran oil purchases for May after the expiry of a waiver on US sanctions. Russia reduced oil production in June by more than the amount agreed in a global deal to cut output as the sector still felt the impact of a contaminated crude crisis that crippled exports. Novak said that Russian oil output last month fell by 278,000 bpd from an October 2018 baseline of 11.41 mn bpd, indicating output in June of about 11.13 mn bpd. Under a deal reached with OPEC and other oil producers, Russia had agreed to reduce output by 228,000 bpd from the October 2018 baseline, indicating it should keep total output around the 11.17 mn-11.18 mn bpd level. OPEC and its allies look set to extend supply cuts at least until the end of 2019 as Iran joined top producers Saudi Arabia, Iraq and Russia in endorsing a policy aimed at propping up the price of crude amid a weakening global economy. Russian pipeline monopoly Transneft said that more contaminated oil had been found at a section of the Druzhba pipeline from Belarus to Poland. Russia suspended west-bound flows through the pipeline in April due to excessive levels of organic chloride in the crude, affecting refiners in Germany, Poland, the Czech Republic, Slovakia, Hungary, Ukraine and Belarus.

Gulf OPEC producers will keep their July oil production within their OPEC target despite the current global supply cut pact that expired at end of June, a signal that the Gulf exporters are reluctant to boost supply. Saudi Arabia, the top global oil exporter’s crude output in June will be around the same level of its May production, and its July output will remain within its obligation under the OPEC-led supply cut deal. Saudi oil output in May was 9.67 mn bpd, according to OPEC figures. Riyadh has been pumping below its 10.3 mn bpd target under the OPEC pact for the past months. In May, Kuwait pumped 2.709 mn bpd, and the UAE’s oil production was 3.055 mn bpd - both below their OPEC’s supply target. The moves indicate that the powerful Gulf oil producers block wants to keep the existing output cut by OPEC unchanged for the second half of the year.

Venezuela’s oil exports recovered in June from a sharp drop the month before, helped by increased deliveries to China, which is now oil firm PDVSA’s primary destination for its crude, according to company records and Refinitiv Eikon data. PDVSA and its joint ventures exported 1.1 mn bpd of crude and refined products last month, a 26 percent increase over May. Chinese buyers took 59 percent of the shipments, followed by India with 18 percent and Singapore with 10 percent. Venezuelan oil exports to China have risen consistently since the sanctions hit, the data showed. In February, the volume shipped was 233,000 bpd, and in June it almost tripled to 656,000 bpd. However, PDVSA’s exports to India, another large receiver, have declined to 200,000 bpd, while deliveries to Europe have remained around 85,000 bpd in recent months. Under oil-for-loan agreements with China and Russia that have supplied billions of dollars to Venezuela in the last decade, PDVSA must deliver the largest portion of its oil exports to China National Petroleum Corp and Russia’s Rosneft to repay the credits. Another share of the exports is exchanged for fuel purchases.

The UAE’s ADNOC, long seen as one of the most conservative oil firms in the Middle East, plans an overhaul for its trading operations as it seeks to emulate the success of rival oil majors and bolster its regional influence. The company has splurged on hiring former employees of private-sector peers and wants to launch a regional oil benchmark, possibly this year, similar to international markers Brent and WTI. The plan is not yet finalised and still has to be approved by UAE authorities, such as the Abu Dhabi Supreme Petroleum Council. The UAE, the third-largest oil producer in OPEC, behind Saudi Arabia and Iraq, pumps around 3 mn bpd. It plans to boost output to 4 mn bpd by 2020. Most of that oil is produced by ADNOC, based in the country’s capital, Abu Dhabi. ADNOC is considering dropping destination restrictions on all of its oil and allowing it to trade freely on the open market, as part of a broader transformation to become more proactive and adaptive to market changes. ADNOC is venturing into oil trading as part of an international expansion aimed at securing new markets.

Iraq’s oil exports from its southern ports have reached 3.42 mn bpd so far in July. Exports from its southern Basra terminals fell to 3.39 mn bpd in June from 3.441 mn bpd in the previous month. Repair works at a section of a marine pipeline in the Gulf which transports crude oil to the Basra ports slowed shipments for three days in mid-June.

China Petroleum and Chemical Corp, known as Sinopec Corp, said it has set up a fuel oil company in Sri Lanka as it looks to supply fuel to ships along a major maritime route. The new unit, called Fuel Oil Sri Lanka Co Ltd, has been registered in Hambantota on the southern tip of the country. Sinopec stressed the strategic location of Hambantota port on the Indian Ocean along a key shipping route between the Suez Canal and the Malacca Strait, which is transited by two-thirds of global oil shipments.

Mexico’s oil regulator approved a $97 mn plan for drilling in an offshore area operated by British supermajor BP in the southern Gulf of Mexico. The four-year exploration plan approved by the national hydrocarbons commission (CNH) covers a 700,000 square kilometre shallow water block, located north of the coast of Tabasco state. BP won the rights to drill last June, along with its partner French oil major Total. BP’s contract is one of over 100 awarded since a sweeping energy reform was finalized in 2014, championed by Mexico’s previous government in a bid to reverse years of declining crude production.  Mexico will face “significant headwinds” for economic growth, as slowing activity in its oil and gas sector weighs on industrial production, Fitch Solutions Macro Research said. Mexico’s industrial activity declined by 3.1 percent, seasonally adjusted, in May from the year-earlier month, the country’s national statistics agency reported earlier. Fitch Solutions said that while Mexico has allotted more funding for Pemex in recent months, that would likely have a limited impact in the near term and production would continue to decline.

Norwegian oil firm Aker BP has made an oil discovery off Norway which could strengthen its hand in negotiations with sometimes partner Equinor on how to develop fields. Aker BP, formed from a merger of BP’s Norwegian oil assets and the Det norske oil firm said it had made an oil discovery with its Polish partner LOTOS. The find is estimated to hold between 80 mn and 200 mn boe in an area with several oil and gas discoveries, nicknamed NOAKA. Up to 700 mn boe are in place overall at the discovery, called Liataarnet, but Aker BP needs to do more work to find out how much it can extract, the company said.

Hocol, a unit of Colombian state-owned oil company Ecopetrol, signed four contracts on Thursday for oil exploration that will require a total investment of some $100 mn, the company said. Holol and Chile-based GeoPark will jointly develop the Llanos 86, Llanos 87 and Llanos 104 oilfields in three of the contracts, investing between $80-$100 mn over the next three years to drill six exploratory wells, Holol said. Holol won the contracts during an auction last month, part of a series of bidding rounds by the state hydrocarbon agency aimed at revitalizing Colombia’s long-stagnant oil sector and generating $1.5 bn in investments in coming months. The country’s crude reserves were up 9.9 percent last year to 1.96 bn barrels, or equivalent to 6.2 years of output. The government wants to increase reserves to at least 10 years equivalent.

The Dominican Republic’s first oil licensing round will be a success if it awards more than two of the 14 blocks on offer this year. The licensing round, which began with disclosure of contract terms, comes after Brazil, Guyana and Mexico attracted billions of dollars in oil investment. Cuba and Panama also have taken steps to lure producers with new areas and by making seismic exploration data available. Dominican Republic offers simple terms that provide low risk and low cost of entry for operators willing to commit to minimum investment. Licensing terms include a minimum investment of $2 mn for onshore blocks and $4 mn for offshore blocks. Bidders can propose their own geographic blocks in the next two months if they do not like the original areas. About a dozen major oil producers, including US Chinese and European companies, have expressed interest in bidding.

Australia’s Woodside Petroleum Ltd has started commissioning activities at the $1.9 bn Greater Enfield oil project off the state of Western Australia. Oil from the project is expected to be sought after by traders in Asia. Australian crude similar to the quality expected from Greater Enfield is selling at record premiums as the oil, in limited supply, can be blended directly with high-sulfur fuel oil to reduce its sulfur content to 0.5 percent to meet new marine fuel specification for the shipping industry. The project included the development of new oil resources and linking them to an existing oilfield called Vincent.

Poland’s biggest oil refiner PKN Orlen is calculating losses related to tainted Russian oil supplies and will submit its claims. Russia halted oil supplies through its Druzhba export pipeline in April after the discovery of excessive levels of organic chloride, which can damage refinery equipment. Supplies of clean oil to Poland partially resumed in June. PKN and its smaller rival Lotos relied on seaborne oil supplies and existing inventories to keep their refineries working during the suspension of Russian deliveries.

Japanese oil refiners are studying measures to handle potential disruption to crude supply from the Middle East amid mounting tensions in the region. The measures include purchasing spot oil from other areas such as West Africa or the US as well as the use of national reserves. Two tankers, one operated by a Japanese shipping company, were attacked in the Gulf. The US blamed Iran for the attacks, raising concerns about a confrontation and driving up oil prices, despite Tehran denying involvement in the explosions at sea.

IEA: International Energy Agency, bpd: barrels per day, mn: million, bn: billion, tn: trillion, IOC: Indian Oil Corp, US: United States, LPG: liquefied petroleum gas, tmt: thousand metric tonne, VAT: Value Added Tax, HPCL: Hindustan Petroleum Corp Ltd, BPCL: Bharat Petroleum Corp Ltd, RIL: Reliance Industries Ltd, PAHAL: Pratyaksh Hastantarit Labh, PMUY: Pradhan Mantri Ujjwala Yojana, PDS: Public Distribution System, CAG: Comptroller and Auditor General, kg: kilogram, PPAC: Petroleum Planning and Analysis Cell, mt: million tonnes, ONGC: Oil and Natural Gas Corp, mtoe: million tonnes of oil equivalent, UAE: United Arab Emirates, DIPAM: Department of Investment and Public Asset Management, PSUs: Public Sector Undertakings, MoPNG: Ministry of Petroleum and Natural Gas, MRPL: Mangalore Refinery and Petrochemicals Ltd, US: United States, STEO: Short Term Energy Outlook, EIA: Energy Information Administration, OPEC: Organization of the Petroleum Exporting Countries, ADNOC: Abu Dhabi National Oil Company, boe: barrels of oil equivalent WTI: West Texas Intermediate


RIL’s talks on stake sale to Saudi Aramco stall

23 July. India’s Reliance Industries Ltd (RIL) talks to grant a minority stake in its refining assets to Saudi Aramco have hit a roadblock over the valuation and structure of the deal. Aramco plans to boost investment in refining and petrochemicals to secure new markets for its crude and sees growth in chemicals as central to its downstream strategy to reduce risk as oil demand slows. RIL had held talks on offering Aramco at least 20 percent in a special purpose vehicle covering refining, petrochemicals and marketing, and with a focus on expansion. RIL operates the world’s biggest refining complex with capacity to process 1.4 mn barrels per day (bpd) of oil at Jamnagar in western India. It plans to expand capacity to 2 mn bpd by 2030, according to plans shared with the Indian government. Aramco and the United Arab Emirates’ national oil company ADNOC teamed up with state-run Indian refiners last year in a plan to build a 1.2 mn bpd refinery and petrochemical project in India’s Maharashtra state.

Source: Reuters

2k litre diesel siphoned off from IOC pipeline

23 July. Diesel worth several crores of rupees was being siphoned off from Indian Oil Corp (IOC) Barauni-Kanpur pipeline in city’s Karchana police circle, police has said. An FIR has been lodged against unknown persons by IOC. In the FIR, IOC authorities have pointed out that the supply was being meddled with since 12 July.

Source: The Economic Times

Instructed committee to increase private participation in LPG business: Pradhan

22 July. A government committee constituted to liberalise the auto fuel retail sector has also been instructed by the oil ministry to suggest ways to increase private participation in the liquefied petroleum gas (LPG) retail, Oil Minister Dharmendra Pradhan said. Currently, parallel or private marketers are not allowed to sell subsidised LPG and are operating in the packed domestic LPG, packed commercial LPG, industrial LPG, and auto LPG space, the plan by the oil ministry to allow private players in the subsidised LPG ecosystem has already made LPG distributors from Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL), and Hindustan Petroleum Corp Ltd (HPCL) apprehensive.  The oil ministry had set up a panel comprising five members including economist Kirit Parikh, former petroleum secretary G C Chaturvedi, former IOC chairman M A Pathan, Indian Institute of Management Ahmedabad Director Errol D’souza, and a joint secretary in the petroleum ministry. According to the oil ministry, during the last financial year (2018-2019), the share of parallel marketers in total packed domestic LPG sale segment stood at 0.7 percent, packed commercial/industrial LPG segment was at 21 percent and auto LPG segment at 55 percent. As of 1 April 2019, public sector undertaking (PSU) oil marketing companies (OMCs) such as IOC, BPCL and HPCL together have 265.4 mn active LPG customers in the domestic category that are being served by 23,737 LPG distributors. PSU OMCs have a total of 192 LPG bottling plants all over India with rated bottling capacity of about 18.3 mn metric tonnes per annum. Moreover, the three PSU OMCs added more than 3,500 LPG distributors in financial year 2018-19.

Source: The Economic Times

India asks Iran to free 18 Indians on board seized oil tanker in Strait of Hormuz

21 July. The government has approached Iran for release of Indian nationals who are among the crew on board a British-flagged oil tanker seized by Tehran in the Strait of Hormuz where tensions have run high following tightening of US (United States) sanctions and deployment of American forces. There are 23 crew members on board the British-flagged oil tanker seized by Iran. Iran’s seizure of the British-flagged oil tanker was allegedly due to a collision with an Iranian fishing boat.

Source: The Economic Times


GAIL hires LNG ship from Mitsui for ferrying US gas

23 July. GAIL (India) Ltd has hired a newly-built LNG (liquefied natural gas) ship from Japan’s Mitsui OSK Lines for ferrying gas from nations such as the US (United States) for three years beginning 2021, and plans to charter hire additional vessels. GAIL in its latest annual report said it has contracted long-term LNG from the US (5.8 mn tonnes per annum) and Russia (2.5 mn tonnes) and is now actively trading the gas in international market. It also hired two vessels - Cadiz Knuten and CLean Horizon - in 2018 for shorter periods to meet its shipping requirements. GAIL said it is fully equipped to meet its spot /short/mid/ long term shipping requirements and has been able to develop LNG shipping capabilities in a very short of time. It is the largest natural gas company of India with about 11,400 km (kilometre) of the cross country existing trunk pipeline network and another 4,000 km pipeline in advance stage of completion. GAIL was instrumental in renegotiating LNG supply contract from Australia through Petronet LNG Ltd. These contracts, GAIL said, were entered into with the primary objective of meeting the demand of a growing Indian economy and with power sector being considered as one of the major long-term buyers of LNG. To mitigate this risk, GAIL said it is exploring opportunities to market LNG volumes in the international markets either directly and/or through its subsidiary, GGSPL Singapore. GAIL is looking at the fertilizer sector for market some of the LNG and is also looking at refineries and steel plants for the same.

Source: The Economic Times

India becomes second-fastest growing gas market, $30 bn war chest ready for supply boom

23 July. India has become the second-fastest growing natural gas market globally as a result of a sustained policy push by the government that is aided by firm investment plans to the tune of a whopping $30 bn for production, import and distribution infrastructure. The multinational investment bank said that India is investing significantly to meet its growing demand. The country has five new terminals under construction with 25.5 million tonnes (mt) per annum of capacity that are likely to be completed by 2020. These terminals will ease import constraints in the existing western and northern market and also make gas available in the southern and eastern parts of the country. India’s LNG (liquefied natural gas) demand is expected to grow from 22 mt in 2018 to 31 mt in 2025 at a compounded annual growth rate of 4 percent. India, as a gas market, is extremely price-sensitive, with demand fluctuating between LNG, propane, and fuel oil, depending on the economics, especially for power and industrial gas usage. Despite significant growth, India is still a decade behind China – the fastest-growing gas market -- on gas infrastructure and penetration, with current gas penetration levels similar to China in 2004.

Source: The Economic Times


CIL output flat in Q1 on stocked up power units

20 July. Coal India Ltd (CIL) has produced 137 million tonnes (mt) of the fuel in first quarter (Q1) FY20, inching up only 0.1 percent year-on-year (y-o-y). The miner supplied 119.6 mt of the fuel to power plants in the quarter, which is 3.2 percent lower than corresponding quarter the previous fiscal. At the end of Q1, power plants across the country had stocked up 30.6 mt of coal, 53 percent more than the levels in end-June during 2018. On top of that, CIL has a stock of about 33 mt. CIL said that since there was a significant rise in power generation from nuclear, hydro and other renewable energy sources, coal-based power plants now have significant stock with them and electricity production will not be affected due to fuel shortage. Breaching the 600 mt production level for the first time, the world’s largest coal miner produced 607 mt of the fuel in FY19, recording an annual growth of 7 percent. According to experts, coal cannot be stockpiled beyond a certain quantity without the risk of catching fire.

Source: The Financial Express

Mahanadi Coalfields is promoting mobile app to curb illegal mining

20 July. Mahanadi Coalfields Ltd (MCL said it is promoting the 'Khanan Prahari' mobile to curb illegal coal mining activity through remote sensing and detection technology. 'Khanan Prahari' app is available on Google Play Store for free installation and is a tool for reporting any illegal coal mining incident through geotagged photographs as well as textual information by any individual, MCL said. The union coal ministry has developed the Coal Mining Surveillance and Management System (CMSMS) software to use space technology for curbing illegal coal mining activity in the country. In the app maps of the coal blocks and coalfield boundaries have been geo-referenced and superimposed on the latest satellite remote sensing images, it said.  This system can scan a region of 100 meters around the existing coalfield boundary to identify any unusual activity which is likely to be illegal coal mining and a trigger will be generated with a reference number.

Source: The Economic Times

Indian utilities' coal imports in first half of 2019 rise over 53 percent from year ago

19 July. Coal imports by Indian coal utilities during the first half of 2019 rose 53.4 percent from a year earlier to 35.47 million tonnes (mt), Central Electricity Authority (CEA) data showed. Demand for seaborne coal imports in India has risen because of a fast rising population and the unavailability of alternative fuels such as natural gas. Imports for power plants at the port of Mundra, in western India’s state of Gujarat, made up 42% of all imports by Indian utilities during the first half of 2019. Imports by Adani Power Ltd’s Mundra plant more than quadrupled from a year earlier to 9.01 mt, while coal shipments by Tata Power Ltd’s utility rose over 6 percent to 6.07 mt. The utilities have been ramping up imports of thermal coal after India’s top court in October eased their earlier stance and paved the way for passing on increased generation costs to consumers. The power plants were forced to cut imports and slash electricity generation after the court barred them from increasing prices for customers in 2016, after their coal supplier Indonesia raised the price of coal. NTPC Ltd, India’s largest electricity generator, shipped in 1.4 mt of coal to various ports during six months ended June 2019, about 11 times of what it imported a year ago. Coal is among the top five commodities imported by India, and about three-fifths of its thermal coal imports come from Indonesia, while less than one-sixth is imported from South Africa. Thermal coal imports rose at the fastest pace in four years in 2018, after two straight years of decline. Higher Indian coal imports are a boon for international miners such as Indonesia’s Adaro Energy, US (United States) coal miner Peabody Energy Corp and global commodity merchants such as Glencore PLC.

Source: Reuters

West Bengal gets clearance for Deocha Pachami coal block

19 July. West Bengal Chief Minister (CM) Mamata Banerjee said the state has got clearance from the Centre for the Deocha Pachami coal block in Birbhum district, which has the potential to generate nearly one lakh employment opportunities. Banerjee said the coal block, the world's second largest, would bring in investments to the tune of Rs120 bn over a period of time. The CM said that besides Birbhum, Bankura, Asansol and Durgapur would also be benefited. The block is located in the south-western part of Birbhum coalfield in Deocha and Panchamati area, adjoining the Dewanganj block. The block, which has an estimated coal reserve of 2.1 bn tonnes, was allotted to West Bengal by the Centre in June last year.

Source: The Economic Times

Government mulls breaking up CIL to boost output

< style="color: #ffffff">QuIck Comment

< style="color: #ffffff">History does not provide evidence of administrative measures such as breaking up of CIL boosting coal output! < style="color: #ffffff">Ugly!

18 July. India may spin off units of Coal India Ltd (CIL), the world’s largest coal miner, into separate listed companies to boost competition and raise government funds. The company and the coal ministry are studying a proposal by the finance ministry’s Department of Investment & Public Asset Management to list four of CIL’s biggest production units, as well as its exploration arm. Prime Minister Narendra Modi’s government has sought to sell some state assets to raise funds, and these divestments will continue to remain a priority, Finance Minister Nirmala Sitharaman said. Spinning off CIL subsidiaries would also lead to greater competition in the domestic coal market and improve corporate governance. The four units -- Mahanadi Coalfields, South Eastern Coalfields, Northern Coalfields and Central Coalfields -- account for more than three-fourths of the company’s output, while constituting less than half of its workforce. The fifth unit would be Central Mine Planning & Design Institute. India’s state run coal giant has been unable to meet growing demand despite abundant resources. CIL produced a record 607 mn metric tonnes in the last fiscal year to March, falling short by 22 percent of a target proposed in 2017. India, the world’s second-largest coal consumer after China, depends on CIL for about 83 percent of the domestic production. The government’s top planning body, NITI Aayog, proposed in 2017 that CIL be broken up so its units can compete against each other. It was dismissed at the time by Coal Minister Piyush Goyal, who said the plan doesn’t reflect government policy.

Source: The Economic Times


Government considers norms to cut discoms’ power cost

< style="color: #ffffff">QuIck Comment

< style="color: #ffffff">Discoms’ power cost is not likely to be impacted by norms! < style="color: #ffffff">Bad!

23 July. The power ministry is considering a proposal to allow all generation companies (gencos) flexibility to supply electricity from any plant in their stable, a move that will reduce cost of power for cash-strapped distribution companies (discoms) and ease pressure to raise consumer tariffs. The ministry’s line of thinking has been encouraged by fuel cost reduction of over Rs3 bn since April due to such flexibility allowed to 49 coal-fired power stations of NTPC Ltd, aggregating 56 GW capacity and about one bn units per day of generation. The move is part of Power Minister R K Singh’s efforts at improving efficiency and sustainability in the power sector. Called Security Constraint Economic Despatch (SCED) in government parlance, the norm allows gencos to raise capacity utilisation of more efficient plants in their stable or units that are closer to coal mines and have lower freight cost — both of which have a bearing on cost of power. Higher capacity utilisation improves ratings of power plants, while discoms save on cost of power purchase.

Source: The Economic Times

Power demand jumps 30 percent at Indian Energy Exchange

22 July. Indian Energy Exchange (IEX) witnessed a 30 percent rise in power demand as compared to 15 July. Average price for deliveries was settled at Rs3.81 per unit, 6.73 percent more than previous average price. According to IEX data, demand for power was 214 mn units while total sell offer stood at 230.35 mn units, 6.18 percent less than on previous. Maximum price settled for the day was Rs7.17 per unit, 14 percent less than 15 July. Demand for power continued to rise and remained more than supplies between 7 pm and 12 midnight during the day.

Source: The Economic Times

Southern and western regions of India recorded zero power supply deficit in Q1: CEA

< style="color: #ffffff">QuIck Comment

< style="color: #ffffff">Zero power deficit in South and West is a bright spot in the power sector! < style="color: #ffffff">Good!

18 July. During the first quarter (Q1) of the Financial Year (FY) 2019-20, India’s power supply increased slightly with the power deficit declining to 0.4 percent from the 0.6 percent recorded during the Q1 of FY 2018-19, according to the data provided by the Central Electricity Authority (CEA). During the period between April -June 2019, around 347,771 mn units of electricity were supplied against a demand of 346,208 mn units. This was a decrease of 1,563 mn units over the targeted energy requirement. During the same period, against a peak demand of 183,673 MW of electricity, 182,533 MW was supplied. This was 1,140 MW fewer than the required supply to meet the peak demand, resulting in a peak power supply deficit of 0.6 percent. According to the CEA report, power generation in India grew by 6.23 percent in Q1 of FY 2018-19. Power generation in the northeastern region grew by 14.5 percent, in the western region by 8.74 percent, in the northern region by 8.22 percent, and in the eastern region by 4.13 percent. The southern region witnessed a negative growth of 0.7 percent, compared to Q1 of FY 2018-19. Meanwhile, the power imported from Bhutan has been increased by 9.83 percent. During the first quarter of FY 2019-20, the northeastern region faced the highest power supply deficit of 5.4 percent, followed by the northern region at 1.1 percent and the eastern region at 0.2 percent. The southern and western regions recorded zero power supply deficit in the country. In terms of peak power supply deficit, the northeastern region led with 2.1 percent followed by the northern region at 1.7 percent, and the southern region at 0.2 percent. The western and eastern region witnessed zero power deficit during the same period. According to the Ministry of Power’s “Vision 2024” document, the power demand in India is expected to grow in the foreseeable future, and the supply will struggle to keep pace with it.

Source: Mercom India

ADB to give 15.4 bn for Tripura power projects

18 July. The Asian Development Bank (ADB) would provide ₹15.4 bn for upgradation of power generation, transmission and distribution projects in Tripura. Tripura State Electricity Corp Ltd (TSECL) CMD (Chairman and Managing Director) Murhari Sopanrao Kele said the ADB would provide 80 percent of the ₹19.25 bn ($275 mn) Tripura power generation upgradation and distribution reliability improvement projects. The rest (₹3.85 bn) would be contributed by the state government, Kele said. Kele, one of the leading experts and analysts in power distribution sector in India, said under the ADB-funded projects, electricity generation at the Rokhia gas-based power plant in western Tripura would be increased from 63 MW to 120 MW at an estimated cost of ₹7 bn. In June, the ADB had agreed to provide financial assistance for the ₹16.5 bn ($235 mn) infrastructure development projects in seven of the eight district headquarters of Tripura.

Source: Livemint

India requires Rs5k bn worth of investments in power transmission: CII

18 July. Prime Minister Narendra Modi’s vision of a $5 tn economy will require an estimated investment of Rs5k bn in the transmission sector over the next few years, industry body Confederation of India Industry (CII) said. India will be consuming 1.8 tn units by 2025 as India’s growth trajectory accelerates, and this requires large investments in the transmission sector, particularly at the state level. CII has recommend upgrading capacities within existing infrastructure, clearly distinguishing the role of the central transmission utility from the functions of the developer, redefining the scope of planning for the centre which should be based on the capacity of the transmission line instead of the geography where the same is located, and finally the need to bring in competition and move away from the cost-plus approach or regulated tariff mechanisms.

Source: The Economic Times

Kerala State Electricity Board rules out power curbs till 31 August

17 July. A high-level meeting of Kerala State Electricity Board Ltd decided against imposing power cuts or load shedding till 31 August at least. The meeting chaired by board CMD (Chairman and Managing Director) N S Pillai at the board headquarters assessed the power scenario as 'bleak, but not alarming'. The high-power committee would meet again for the next review on 1 August.

Source: The Economic Times


MNRE issues norms to implement scheme for farmers to boost solar energy

22 July. The Ministry of New and Renewable Energy (MNRE) issued guidelines for rollout of the Rs344.22 bn PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan) scheme, which would encourage farmers to generate solar power in their farms and use the clean energy to replace their diesel water pumps. The PM-KUSUM scheme entails setting up of 25,750 MW solar capacity by 2022 with the total central financial support of Rs344.22 bn. The Cabinet Committee on Economic Affairs (CCEA) in February approved the launch of the scheme with the objective of providing financial and water security. The scheme has three components. The Component-A provides for setting up of 10,000 MW of decentralised ground/ stilt-mounted grid-connected solar or other renewable energy-based power plants. The Component-B of the scheme provides for installation of 17.50 lakh stand-alone solar agriculture pumps, while the Component-C envisages solarisation of 10 lakh grid-connected agriculture pumps.

Source: Business Standard

BHEL bags order worth Rs4.8 bn from Nuclear Power Corp

22 July. Bharat Heavy Electricals has secured a prestigious order worth Rs4.86 bn from Nuclear Power Corp for erection work of reactor side equipment of 2x1000 MWe (Units 3&4) Kudankulam Nuclear Power Project in Tamil Nadu, being set up under foreign cooperation (Russia).

Source: Reuters

Amplus Energy to invest Rs5 bn for 100 MW solar project in Uttar Pradesh

21 July. Amplus Energy Solutions has announced investment of Rs5 bn for its second open access solar project of 100MW in district Deoria of Uttar Pradesh. The ground-breaking ceremony by the state government will kick-off this project, the company said. Prior to this, Amplus had committed investment of Rs2.50 bn for setting up a 50 MW open access solar project in Mirzapur. The project is under construction and expected to be commissioned by September 2019.

Source: Business Standard

Assam utility opens single window clearance for solar rooftop installations

21 July. Public sector power utility, Assam Power Distribution Company Ltd (APDCL) has come up with a single window clearance system for accelerating deployment of Grid Connected Solar Rooftop installations in Assam. APDCL said that it has come up with a web portal which will facilitate as a single-window clearance system for the consumers willing to install rooftop solar power plants in their premises.

Source: The Economic Times

Tata Power discom tries to promote solar power in north Delhi

21 July. In line with the Delhi government’s solar policy initiatives, power distributer Tata Power-DDL organised an event ‘Solarise Shakurbasti’ to promote the use of rooftop solar power in the north Delhi area. Power Minister Satyendra Jain highlighted several initiatives taken by Delhi government and Tata Power DDL to promote clean energy at the event.

Source: The Economic Times

Chandigarh to review all pending cases of solar subsidy

20 July. The Union Territory (UT) administration has decided to review all pending cases of solar subsidy. Confirming the development, Debendra Dalai, Director, UT environment department, and CEO (Chief Executive Officer), Chandigarh Renewal Energy, Science and Technology Promotion Society (CREST), said they would review all pending cases and subsidy would be released to all eligible applicants. A meeting was also held with the UT electricity department to simplify the process for getting required approval from the electricity department. As per the government’s directive, a subsidy of 30 percent on capital cost is available for rooftop SPV (solar photovoltaic) plant.

Source: The Economic Times

India to touch renewable energy capacity of 260 GW by 2024

19 July. India expects to achieve a renewable energy capacity target of 260 GW by 2024, as the country sees rapid growth in renewable capacity backed by government orders, private equity and pension fund investments. India’s renewable power capacity soared by almost 150 percent in the last five years to 77.6 GW, while the government set a target of 175 GW by 2022. India is also formulating a policy to build a 30 GW local capacity for manufacturing solar cells and modules by 2024, the MNRE (Ministry of New and Renewable Energy) secretary Anand Kumar, said.

Source: Reuters

Centre advises state governments to exempt EVs from permit requirements

19 July. The Ministry of Road Transport and Highways (MoRTH) has advised the state governments to exempt EVs (electric vehicles) from permit requirements. A letter signed by the joint secretary of MoRTH, Abhay Damle, was sent to principal secretaries (transport) and transport commissioner of all states. The letter, dated 17 July, said in October last year, the ministry had exempted EVs from the requirements of passenger transport permit. The ministry advised states to either minimise the road tax for EVs or exempt them from paying road tax for vehicle registration.

Source: Business Standard

IEA sees hike in India’s renewable energy sector investment

19 July. The International Energy Agency (IEA) expects India to revise its renewable energy capacity addition target in the coming years, IEA executive director Fatih Birol said. India is likely to revise the target upwards and this will entail a higher flow of investments into the renewable energy sector, Birol said. India currently has a target to set up 175 GW of renewable power, led by solar energy, by 2022.

Source: Reuters

West Bengal failed to take initiative to create green energy fund: CAG

18 July. West Bengal failed to create a Green Energy Fund (GEF) under the renewable energy policy of the government, the Comptroller and Auditor General of India (CAG) has said in its audit report. The responsibility for creation and management of the energy fund was thrust upon the state’s nodal agency, West Bengal Green Energy Development Corp Ltd, which has not taken any serious initiative in this direction, the Comptroller and Auditor General of India (CAG) said.

Source: Business Standard

Power ministry approves proposal for early nod to 66 GW renewable energy project

18 July. The power ministry said it has approved proposal for early regulatory nod by CERC (Central Electricity Regulatory Commission) for transmission schemes for 66.5 GW renewable energy (RE) generation in order to fast-track green projects in the country. The ministry has issued an order in this regard. As a part of the steps necessary to fulfill the commitment made by India under the Nationally Determined Contribution pursuant to the Paris Agreement on Environment, the country will set up 175 GW of RE capacities by 2022.

Source: The Economic Times

Tata Power ties up with NTT Com-Netmagic to set up 50 MW solar project

17 July. Tata Power said it has partnered with NTT Com-Netmagic to build 50 MW solar photovoltaic power plant in Solapur, Maharashtra. The NTT Com-Netmagic is a managed hosting and multi-cloud hybrid IT solution provider. The power will be supplied through open access under a long-term power purchase agreement, it said.

Source: The Economic Times


Goldman Sachs sees lower oil demand growth in 2019

22 July. Goldman Sachs lowered its year-on-year oil demand forecast for 2019 citing disappointing global economic activity, which was further weighed down by milder weather, fuel power demand destruction and historical downward revisions, suggesting lower oil demand growth in 2018. The bank revised down its 2019 oil demand growth forecast to 1.275 mn barrels per day (bpd), from 1.45 mn bpd at the beginning of the year. Goldman forecast 2020 oil demand growth at 1.45 mn bpd on a gradual acceleration in global economic growth as well as a demand boost from International Maritime Organization’s new fuel rules for ships from the start of 2020.

Source: Reuters

Russian President orders review of Rosneft oilfield tax break request

22 July. Russian President Vladimir Putin has asked his government to justify giving tax breaks to Russian oil major Rosneft for developing a Siberian oilfield. Rosneft’s request for tax deductions for developing Priobsky, its biggest oilfield, was approved by the government. Priobsky, located in the western Siberian region of Khanty-Mansiysk, is one of Russia’s biggest oilfields.

Source: Reuters

Libya’s NOC declares force majeure at key Sharara oilfield after valve closure

21 July. Libya’s National Oil Corp (NOC) declared force majeure late at the country’s largest oilfield, El Sharara, after it was shut down the previous day due to a suspected valve closure. The strategic oilfield has been the target of numerous shutdowns by both protesters and armed groups in recent years. Crude oil shipments to the port of Zawiya, some 49 km (30.4 miles) west of Tripoli, have been halted as a result of the closure, the NOC said. The shutdown caused a loss of about 290,000 barrels per day (bpd) of production worth an estimated $19 mn, it said.

Source: Reuters

Brazil’s Petrobras confirms Trident’s winning $1 bn bid for oil fields

20 July. Brazil’s state-controlled oil company Petróleo Brasileiro SA (Petrobras) confirmed that Trident Energy presented the highest bid to acquire the Pampo and Enchova oil fields, offering close to $1 bn. Petrobras said the deal has yet to receive final approval from all of its internal departments. Warburg Pincus-backed Trident was the winner in a re-bid for the fields.

Source: Reuters


Indonesia agrees to extend Corridor natural gas block contract for 20 yrs

22 July. Indonesia has agreed to extend the production sharing contract for the Corridor natural gas block with ConocoPhillips, Spain’s Repsol SA and Pertamina, Deputy Energy Minister Arcandra Tahar said. The existing contract will expire in December 2023 and the ministry has agreed to extend the contract by 20 years to 2043. ConocoPhillips will operate the block until 2026 before starting to transfer operatorship to state-owned Pertamina, Energy Minister Ignasius Jonan said. Corridor is Indonesia’s second largest gas producing block, with 827 mn standard cubic feet per day (mmscfd) of gas lifting in the first semester this year, according to upstream oil and gas regulator SKK Migas, higher than the 810 mmscfd target. Under the new contract, the contractors will have 53.5 percent of the gas produced from the block and 48.5 percent of the oil, Tahar said.

Source: Reuters

Italian, Chinese majors vie in Pakistan’s mega LNG tender

19 July. Italian oil major Eni, China’s overseas energy unit PetroChina and two trading houses are vying to supply liquefied natural gas (LNG) to Pakistan in one of the largest tenders ever worth billions of dollars. The 240-cargo 10-year tender, which is likely to be worth from $5 bn to $6 bn. Pakistan is expected to be a significant growth driver in global LNG demand, with Wood Mackenzie estimating the country will need 25 million tonnes (mt) a year as domestic supplies dwindle and its economy grows. That would make it a top-five LNG buyer. Eni and PetroChina’s Singapore unit were joined by the trading arm of Azeri state oil company SOCAR and commodities trader Trafigura in placing offers. Pakistan LNG, the state-owned company that issued the tender, declined to name any bidders. SOCAR Trading SA confirmed it had bid. The tender is keenly watched due to its size and because Pakistan, gripped in an anti-corruption drive under the government of Prime Minister Imran Khan, is expected to publish the lowest prices offered by the companies. This will give valuable insight into the opaque LNG market, which is characterized by closed bilateral trades, secret long-term supply agreements and an over-the-counter spot market. Commercial offers are expected to be opened on 2 August, when Pakistan LNG is likely to reveal bids. The largest tender in recent years was issued by Egypt in October 2016 for 96 cargoes, but that was for a two-year period between 2017 and 2018 after the country suffered an acute gas shortage. Pakistan, like most Asian buyers, purchases LNG priced against Brent crude oil expressed as a price slope, or percentage of the oil contract. Pakistan LNG issued the tender in early June to import 240 LNG cargoes of 140,000 cubic meters each for delivery over a 10-year period for the country’s second LNG terminal. The cargoes will be sent into the Pakistan GasPort Consortium Ltd terminal, with first delivery expected between September 2019 and March 2020.

Source: Reuters

Canada LNG facility snags first export contract

17 July. The recently expanded Tilbury LNG (liquefied natural gas) terminal in Delta, British Columbia (BC), has won its first export contract, facility owner FortisBC said. FortisBC said that it will produce LNG for Top Speed Energy Corp to export to China under a two-year term supply agreement. The BC firm contends the term supply agreement is unprecedented in Canada’s LNG export industry and was made possible with the Tilbury expansion earlier this year, which added 250,000 tonnes per year of LNG production capacity and 46,000 cubic meters of storage. Under the agreement, 53,000 tonnes of LNG a year – approximately 60 standard-sized ISO shipping containers per week – will be shipped from Tilbury to China by the summer of 2021, FortisBC said.

Source: Rigzone

Russian gas transit via Ukraine jumps on Nord Stream maintenance

17 July. Russian gas giant Gazprom has increased its gas transit via Ukraine to Europe by about a quarter, to 300 mn cubic meters per day, gas transport firm Ukrtransgaz said. Ukrtransgaz said a repair of both two lines of the Nord Stream pipeline between Russia and Germany was the reason for the jump in transit. Both lines are shut for planned maintenance 16-30 July. Russian gas volumes piped via Ukraine to European consumers in the first five months of 2019 rose to 37.6 billion cubic meters (bcm), up 8 percent from a year earlier. More than a third of Russia’s gas exports to the European Union cross Ukraine, providing Kiev with valuable transit fee income. Russia’s gas exports via Ukraine fell 7 percent in 2018 to 86.8 bcm.

Source: Reuters


US coal miners discouraged by black lung meeting with McConnell

23 July. A group of coal miners afflicted with black lung disease met with Senate Majority Leader Mitch McConnell as part of an effort to convince lawmakers to restore a higher excise tax on coal companies to help fund their medical care, but several said the meeting left them discouraged. Coal companies had been required to pay a $1.10 per ton tax on underground coal to finance the federal Black Lung Disability Trust Fund, which supports disabled miners whose employers go bankrupt and can no longer pay out medical benefits. The coal industry had lobbied hard to allow the tax to drop as scheduled, despite a government report saying the fund was in dire financial straits, arguing the companies were already facing economic pain and that benefits for afflicted miners would not be affected. The Government Accountability Office has said without an extension of previous tax levels the fund’s debt will rise from $5 bn to $15 bn by 2050 – a burden that would likely have to be met by US (United States) taxpayers instead of coal companies.

Source: Reuters

Australia’s South32 posts 69 percent rise in annual coking coal production

18 July. Australia’s South32 Ltd reported a 69 percent jump in full-year coking coal production, beating analyst estimates, as the diversified miner ramped up production at its Illawarra project. The company, spun off from mining giant BHP Group in 2015, also said it had received bids for its South Africa Energy Coal assets in the June quarter and was currently in talks with interested parties. Coking coal output from Illawarra rose to 5.4 million tonnes (mt) from 3.2 mt for the year. South32’s Illawarra operations at New South Wales in Australia accounts for nearly all of the company’s coking coal output.

Source: Reuters


Nigeria signs agreement with Siemens to improve power transmission

22 July. Nigeria signed an electricity road map agreement with Germany-based Siemens to improve the West African country’s power grid capacity. Nigerian President Muhammadu Buhari presided over the signing of implementation agreement for the Nigeria Electrification Roadmap, a partnership between governments of Nigeria and Germany and Siemens AG, to upgrade Nigeria’s power transmission and distribution infrastructure. Through the agreement, Siemens is expected to help Nigeria achieve 11,000 MW of reliable power supply by 2023, in two phases. He said his meeting with the visiting German Chancellor Angela Merkel to Nigeria in August 2018 fixed the power sector as a key priority for cooperation. He continued that after these transmission and distribution system bottlenecks have been fixed, Nigeria will seek in the third and final phase to drive generation capacity and overall grid capacity to 25,000 MW.

Source: Xinhua

Greece to overhaul troubled utility Public Power Corp

22 July. Greece unveiled a plan to overhaul loss-making state-controlled Public Power Corp (PPC) to shore up its finances, including voluntary redundancies and selling shares in its distribution network. PPC, which is 51 percent owned by the state, has been struggling to collect part of more than €2.4 bn ($2.7 bn) of arrears from bills left unpaid during the country’s debt crisis, which began in late 2009. Under a post-bailout agreement between Greece and its lenders, PPC sells power at below-cost prices to alternative producers to help open up the market, a measure which has also weighed on the utility’s profit. Outlining his main policy for PPC after the Greek conservative government won a 7 July election, Energy Minister Kostis Hatzidakis said that Greece will seek to scrap that obligation. The new government also plans to proceed with the partial privatisation of PPC’s low-voltage distribution network and implement a targeted voluntary redundancy scheme.

Source: Reuters

Jubilee restructures its $500 mn Uganda power plant loans

21 July. Uganda’s power producer Bujagali Energy Limited, in which Jubilee Holdings  has a 25 percent stake, last year took new loans worth $500 mn (Sh51.5 bn) to extend the maturity of debt and lower its finance costs. The debt refinancing was disclosed by the International Finance Corp (IFC), which provided $100 mn (Sh10.3 bn) as its share of the new debt pool. The IFC says it contributed the sum to the refinancing for its own account, out of an about $500 mn total package. Bujagali has an installed capacity of 250 MW and supplies nearly half of Uganda’s effective energy capacity. Bujagali is an independent power producer, which sells electricity to Uganda Electricity Transmission Company Ltd under a 30-year power purchase agreement signed on 6 December 2007.

Source: Business Daily


Japan’s Marubeni backs blockchain crowd-sourcing platform for solar, wind farms

23 July. Japan’s Marubeni Corp has agreed to back a blockchain power purchasing platform, WePower, that is looking to establish itself in Australia to tap rapid growth in solar and wind power, the two firms said. WePower has designed a blockchain platform that it says makes it easy for small- and medium-sized businesses to buy power from wind and solar project developers, offering standardized, digital power purchase agreements to help underwrite new projects.

Source: Reuters

Pakistan plans clean energy wave to make up 20 percent of its capacity

23 July. Pakistan is planning a wave of new wind and solar plants that will expand its clean energy capacity to about fifth of its total. The South Asian nation plans to increase its renewables by more than four times by adding as much as 7 GW to bring its total to 8-9 GW by 2025, Nadeem Babar, head of Pakistan’s energy task force, said. The new energy policy that targets lifting the country’s total generation capacity by 40 percent to 42-43 GW is expected to be approved within a month, he said. The shift to clean generation comes after Pakistan has nearly bridged a power deficit by adding 10 GW of capacity in the past six years to ease long, unannounced blackouts in major cities. Pakistan plans to auction the right to build renewable capacity annually starting in December. It will also deregulate clean energy for companies that want to build a wind farm or use solar panels to supply private businesses, Babar said.


Biofuel to add to rather than replace gasoline in Brazil: BP

22 July. BP does not expect supply from additional biofuel capacity in Brazil - where it is combining its unit with US (United States) grain trader Bunge’s - to replace diesel and gasoline demand, BP’s head of Alternative Energy, Dev Sanyal, said. Through the deal BP will increase its biofuel production to 22 million tonnes (mt) from 10 mt a year, firmly focusing on Brazil as its biofuels production and consumption hub.

Source: Reuters

Africa’s largest wind power project opens in northern Kenya

20 July. Kenya unveiled Africa’s largest wind power plant, a project aimed at reducing electricity costs and dependence on fossil fuels and moving the nation to meet its ambitious goal of 100 percent green energy next year. The sprawling wind farm of 365 turbines on the shores of Lake Turkana in northern Kenya was designed to boost the nation’s electricity supply by 13 percent, giving more Kenyans access at a lower cost, President Uhuru Kenyatta said at its launch. Kenya has made great strides in renewable energy in recent years and is considered to one of the few African nations making progress toward clean power. About 70 percent of the nation’s electricity comes from renewable sources such as hydropower and geothermal - more than three times the global average. Kenyatta, who has announced plans to move the country to 100 percent green energy by 2020, said power from the $775 mn wind farm would help the government reach its goals of ensuring housing, health care, jobs and food security to all citizens.

Source: Reuters

Spain struggles to regulate renewable energy gold rush

19 July. Spanish authorities fear that a speculative rush threatens to hold back the development of renewable energy, saying coveted rights to connect to the national power grid are being secured with the sole aim of selling them on for a profit. Spain plans to ramp up solar and wind energy and phase out nuclear and coal-fired power stations, creating incentives for speculators to pounce on the rights to a limited number of grid connection points. Tomas Garcia, managing director for solar and wind projects in Spain and Portugal at renewable energy group BayWa r.e., said Spanish solar projects were attracting particular attention. A massive roll-out of renewables is high on Spain’s agenda as consensus builds among European Union leaders to agree on balancing out the bloc’s carbon emissions to net zero by 2050.

Source: Reuters

Hot weather could force EDF to halt output at Golfech nuclear plant

19 July. French utility EDF may have to shut down electricity generation at its 2,600 MW Golfech nuclear power plant in the south of France from 23 July because of high temperatures forecast on the Garonne river. The power utility uses water from the river to cool the two reactors at the plant, but French meteorological services have forecast hot and dry weather next week, with a risk of a heatwave in the southeastern parts of the country. Both reactors could be unavailable. EDF operates France’s 58 nuclear reactors, which account for more than 75 percent of the country’s electricity needs.

Source: Reuters

US solar sector launches lobbying push to preserve key subsidy

18 July. The US (United States) solar industry kicked off a lobbying push aimed at convincing Congress to extend a generous tax credit for solar energy systems that is set to begin phasing out next year. In a letter sent to congressional lawmakers and signed by more than 900 solar companies, the Solar Energy Industries Association (SEIA) argued that the 30 percent tax credit for solar energy systems should be preserved because it has helped generate $140 bn in investment. The subsidy has also created more than 200,000 jobs even though solar energy accounts for only a little more than 2 percent of US electricity generation, the letter said. The credit’s phase-out is a major change for an industry that has relied on it to underpin growth for well over a decade. Since it was implemented in 2006, US solar installations have grown more than 50 percent a year, according to SEIA. That growth has sparked declines in the cost of solar energy that enable it to compete with fossil fuel-generated power, making an extension far from a sure bet.

Source: Reuters

China Energy to expand ultra-low emission coal-fired power

18 July. China Energy Group, the country’s biggest power generator, will add more than 6 GW of new ultra-low emission coal-fired capacity this year as it bids to meet growing electricity demand. The company also expected to build another 5 GW of low-emission capacity next year. China Energy operated coal-fired plants with a total capacity of 175 GW at the end of 2018, 77.4 percent of its total capacity and about 10 percent of the entire country’s capacity. The firm is also planning to launch another carbon capture and storage (CCS) project in northwest China next year as part of its efforts to reduce the environmental impact of using coal. It already runs a CCS plant at its coal-to-oil facility in Erdos in Inner Mongolia. China, the world’s biggest greenhouse gas emitter, has vowed to control new coal production and new coal-fired power capacity as part of its commitments to curb pollution and tackle global warming. However, it has shown signs of relaxing restrictions in recent months amid an economic slowdown. China aims to bring greenhouse gas emissions to a peak by “around 2030” and raise the share of non-fossil fuels in its total energy mix to 20 percent by the end of the next decade, up from 15 percent in 2020. Those targets could be strengthened next year. But it has been under fire for allowing large numbers of new coal-fired power plants. China restarted construction on more than 50 GW of suspended coal power plants last year. China Energy also has ambitions to export more of its low emission coal-fired power technology. China uses ultra-low emissions technology at about 80 percent of its total coal-fired capacity. The technology cuts smog particles down to a minimum, but does little to curb climate-warming carbon emissions.

Source: Reuters


Scenario of Electricity Trading at Power Exchange in India

Year Volume of Trade (Billion Units)
2008-09 2.77
2009-10 7.19
2010-11 15.52
2011-12 15.54
2012-13 23.54
2013-14 30.67
2014-15 29.4
2015-16 35.01
2016-17 41.12
2017-18 47.7
2018-19 53.52

Trends in Weighted Average Price* of Electricity at Power Exchange

*Above prices based on electricity transacted at both the power exchanges i.e. IEX and PXIL.

Source: Lok Sabha Questions for Ministry of Power

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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