Energy News MonitorPublished on Jun 24, 2024
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Energy News Monitor | Volume XX, Issue 44

Quick Notes

The electric vehicle value chain: China reinvents the wheel


China’s dominance of the electric vehicle (EV) value chain and EV adoption was unexpected. The West repeated the mistake it made with Japanese Internal Combustion Engine (ICE) cars and assumed that the technological and design inadequacies of Chinese EVs would pose no threat. Today, governments from across the world, including the Government of India, are struggling to respond to the quality and affordability of Chinese EVs, China’s dominance over EV production and EV adoption. China began its EV drive later than the United States (US). Both countries had similar policies to incentivise companies and consumers, but China surpassed the US EV industry within a decade.  Government-led policies, incentives and subsidies played a big role in putting China ahead of its competition. However, copying China today is not likely to beat China in the future.

EV Value Chain Basic

There are three main types of electric vehicles (EVs). Battery EVs (BEVs) are “all-electric” vehicles whose batteries are recharged through a wall outlet. Plug-in hybrid EVs (PHEVs) can either use electric and internal combustion engines (ICEs). Hybrid electric vehicles (HEVs) are similar to PHEVs but they cannot operate on electricity alone and they cannot be plugged in for battery recharge. Lithium-ion batteries (LIBs) currently dominate the EV industry because they have relatively high energy density, have high tolerance for high and low temperatures, have a low self-discharge rate, and can withstand many charge cycles. LIBs are material-intensive and these materials (metals and minerals) are geologically dispersed.

The cathode chemistry of a battery determines both the battery performance and its material demand. In the context of cathode chemistry, three combinations are most relevant: lithium (Li) nickel (Ni) manganese (Mn) cobalt (Co) oxide (NMC); Li, Ni, Co aluminium oxide (NCA); and Li iron phosphate (LFP). NMC and NCA cathodes offer high energy density based on higher Ni content in the cathode.  LFP is a lower-cost and more stable system, with a lower risk of catching fire and a longer cycle life. Ni-based cathodes, such as in NMC and NCA, were dominant in the electric car battery market until 2021.  In the last two years, the cost advantages for LFP in China have become more significant as subsidies that favoured high-Ni chemistries were phased out. The typical component at the anode is natural graphite (Gr, crystallised carbon) which determines charging time.

The US Geological Survey (USGS) classifies 50 minerals as “critical”. Clean energy technologies rely on high volumes of 11 of these. Five of the eleven—Li, Co, Ni, Mn and Gr are critical for LIB technologies. These elements have to be individually mined and processed before being assembled for manufacturing batteries that go into EVs. Consequently, the exploration and mining of these minerals and production of raw material make up the first two segments of the upstream value chain in EV production. The midstream and downstream segments consist of cathode and anode production, battery manufacture, EV assembly, followed by recycling and reuse of batteries.

The mineral and metal resource endowment for batteries is geographically concentrated to some degree. More than 50 percent of Li and Co are in Chile and the Democratic Republic of the Congo (DRC), respectively; Mn reserves are concentrated in South Africa, Ukraine, and Brazil; Gr is concentrated in Russia, China, and Brazil; and Ni is concentrated in Indonesia, Australia, and Brazil.

In mining for critical minerals required for EV manufacture, Australia dominated Li mining with over a 50 percent share while Indonesia dominated Ni mining with over a 35 percent share in 2023. Cobalt mining was dominated by the DRC with over 70 percent share, while natural Gr mining was dominated by China with over 75 percent of global total.  In material processing, China dominated processing of all critical minerals with over 65 percent share for Li, over 35 percent for Ni, over 75 percent for Co, over 90 percent for high purity manganese sulphate  (MnSo4), and almost 100 percent for Gr. China also dominated cell/battery production with over 83 percent of global total and close to 60 percent of EV manufacture in 2023.  Europe and the United States together accounted for approximately 13 percent of global capacity. 70 percent of battery production capacity planned for 2030 is in China. The current global capacity for battery recycling is around 200 kilo tonnes/year with China accounting for about half. China’s dominant position is expected to be retained due to announced additional capacity but China’s share in the total is expected to decline to some extent.

China takes the wheel

The beginning of China’s EV initiative can be traced to 1986 when the 863 Program (March 1986), an applied research and development program was implemented to stimulate the development of advanced technologies in a wide range of fields. The key objective was to make China independent of financial obligations for foreign technologies and received 5 percent of total government spending that year. New energy vehicles (NEVs) were included as one of the focus areas of the programme around the early 2000s. BYD, one of the most successful Chinese EV manufacturers, entered the auto sector as a privately owned company in 2003.

Initially, China requested foreign automakers working in joint ventures with Chinese automakers to share their PEV technology with the Chinese companies. Though this appeared to violate World Trade Organisation (WTO) norms, complaints were not pursued as China claimed it was a voluntary policy. Foreign companies exporting PEVs to China were subject to high tariffs and were not eligible for PEV subsidies. Chinese banks, working closely with the Chinese government, enabled Chinese suppliers to acquire ownership interests in mines and processing facilities in Africa, Australia, Europe, North America, and South America. This led to Chinese battery and EV firms to indulge in a specialised vertical integration strategy to secure comparative advantage.

In 2001, EV technology was introduced as a priority science research project in China’s five-year plan, the country’s highest-level economic blueprint. In 2007, the industry got a significant boost when an auto engineer became China’s minister of science and technology. Since then, EV development has been consistently prioritised in China’s national economic planning. In 2009, the Chinese government started to provide considerable subsidies, at both central and local levels, for NEV production and purchase. According to the NEV policy, which introduced the catalogue of ‘Regulations on the Standards of Automotive Power Battery Industry’ commonly known as the ‘whitelist’, only battery models fully owned by domestic battery makers were listed, and hence eligible for government NEV subsidies. Since 2018, China replaced the direct subsidy with a market-based policy combining an NEV credit (increasing each year) and a trading system with the pre-existing fuel consumption requirements, known as CAFC. This meant manufacturers had to invest in research & development (R&D) to improve the fuel efficiency of their vehicles or buy credits from other manufacturers to avoid penalties.

China allowed Western EV firms like Tesla to build production facilities in the country. Favourable policies allowed Tesla’s gigafactory in Shanghai to be built quickly in 2019. The Shanghai Gigafactory is currently Tesla’s most productive manufacturing hub and accounts for over half of Tesla cars delivered in 2022. China benefitted from the presence of a pioneer in EV production initially as a role model and later as a competitor.

Chinese EV manufacturers initially focussed on electric buses and motorcycles which did not attract as much attention as cars in the industry. BYD’s entry product was the electric bus.  Electric buses needed to be heavier than cars and required batteries that were operational for over 18 hours a day. This enabled BYD to push the boundaries for battery technology. Geely, another leading Chinese EV producer, focussed on motorbikes, which required lighter and more portable batteries than cars. With technologies for two extremes of battery technology covered, these two Chinese companies now lead EV production.

As part of incentives for demand, China offered subsidies for the purchase of EVs (including buses) from US$500 to US$ 8000 per vehicle. EV producers in China also collaborated with taxi companies to map locations for charging stations and tested scheduling options for battery charging that matched the current performance levels of EVs. EV taxi operators in China have two fleets of cars: one for the morning shift and one for the evening shift, with different charging times. This schedule not only addressed the battery constraints of EVs but also helped to flatten the consumption curve of a city’s power grid.

On technology, China’s focus on LFP batteries proved to be an advantage. High-Ni batteries, with higher energy densities and recycle values than LFP batteries, are preferred in markets with strict battery recycling requirements, such as Europe, the United States and Japan. However, in price-sensitive markets, LFP batteries are preferred as they have a longer lifespan, perform better at higher temperatures, have higher thermal stability and lower lifecycle emissions. In addition, the cost of minerals like Co and Ni, which are used in high-Ni batteries were rising. This made LFP batteries, which do not use these expensive minerals, a more cost-effective option. Moreover, a research consortium that owned the patents for LFP technology allowed Chinese manufacturers to use LFP technology without paying a license fee, as long as the batteries were only used in China. This made LFP batteries even more cost-effective for Chinese manufacturers and affordable for EV adopters. However, these patents and license fees expired in 2022, which means manufacturers outside of China can now also produce and sell LFP batteries without having to pay these fees. This has made the production and sales of LFP batteries outside China more attractive.

Sodium-ion batteries have begun to catch up with LIBs. Sodium-ion batteries have similar applications to LFP batteries, although they have a lower energy density. Sodium-ion batteries are increasingly seen as appealing alternatives to LFP batteries because they may use less expensive, more abundant materials, and need fewer toxic raw materials. As with LFP batteries, China is leading the development of sodium-ion batteries, with over 90 percent of the announced manufacturing capacity located there.


Countries that are alarmed by the dominance of China in the EV value chain (along with the solar and other low carbon technologies), are pursuing a “me-too” approach and adopting industrial policies used by China in the early days of its industrial development. These policies are not likely to beat China, because China is a moving target often advancing faster than competitors. Technology is advancing even faster and investment in the leading technology today may be irrelevant tomorrow. Even if policies are successful, China’s unique features in the political, geopolitical, economic and social realms that contributed to its industrial success cannot be replicated. “Me-too” strategies will add to overcapacity, squander scarce capital, fragment efforts to address climate change and decrease affordability of low carbon technologies.

International Energy Agency

Monthly News Commentary: Oil

Electricity and LPG drive Decline in Kerosene Demand



Kerosene consumption in the country has declined sharply by 26 percent CAGR (compounded annual growth rate) between 2013-14 and 2022-23, mainly due to government policies to promote clean energy. The government data showed that the consumption of kerosene has seen a steady decreasing trend with a CAGR of (-) 25.78 percent from 2013-14 to 2022-23. Among all the petroleum products, the HSDO (diesel), which has the highest share of consumption (38.52 percent) during 2022-23, experienced a positive growth of 12.05 percent over the last year. Petrol and pet coke have witnessed a growth of 13.38 percent and 28.68 percent, respectively, over the last year.

According to data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry, India’s fuel consumption rose 5.7 percent year-on-year in February helped by strong factory activity in the world's third-biggest oil importer and consumer. Total consumption, a proxy for oil demand, totalled 19.72 million metric tonnes (MT) (4.98 million barrels per day (bpd)) in February, up from 18.66 MT last year. Demand was up about 5.1 percent on a daily basis from the 4.74 million bpd (20.04 MT) consumed in January. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, rose by 6.2 percent year-on-year to 7.44 MT in February. They were up about 6.8 percent month-on-month to 1.88 million bpd on a per-day basis. Sales of gasoline in February rose 8.9 percent from the previous year to 3.02 MT. Cooking gas, or liquefied petroleum gas sales rose by 8.5 percent to 2.59 MT, while naphtha sales jumped by 11.7 percent to about 1.19 MT, compared with last February.


The Union Cabinet has approved the extension of a targeted subsidy of INR300 per 14.2 kg (kilogram) cylinder for up to 12 refills per year for the beneficiaries of Pradhan Mantri Ujjwala Yojana (PMUY) for the financial year 2024-25. As of 1 March 2024, there are more than 102.7 million PMUY beneficiaries. The total expenditure will be INR120 billion (bn) (US$1.44 bn) for the financial year 2024-25. As per the Ministry of Petroleum and Natural Gas, the subsidy is credited directly to the bank accounts of the eligible beneficiaries. To make liquefied petroleum gas (LPG), a clean cooking fuel, available to rural and deprived poor households, the government launched the Pradhan Mantri Ujjwala Yojana in May 2016, to provide deposit-free LPG connections to adult women of poor households. India imports about 60 percent of its LPG requirements. To shield PMUY beneficiaries from the impact of sharp fluctuations in international prices of LPG and to make LPG more affordable to PMUY consumers, thereby ensuring sustained usage of LPG by them, the government started a targeted subsidy of INR200 per 14.2 kg cylinder for up to 12 refills per annum (and proportionately pro-rated for 5 kg connections) to the PMUY consumers in May 2022. In October 2023, the government increased targeted subsidies to INR300 (US$3.6) per 14.2 kg cylinder for up to 12 refills per annum (and proportionately pro-rated for 5 kg connections). As of 1 February 2024, the effective price of domestic LPG for PMUY consumers is INR603 per 14.2 kg LPG cylinder (Delhi). The average LPG consumption of PMUY consumers has increased by 29 percent from 3.01 refills in 2019-20 to 3.87 refills (till January 2024) prorated for 2023-24. All PMUY beneficiaries are eligible for this targeted subsidy.

Retail Prices

Petrol and diesel prices are the costliest in the country in Andhra Pradesh, Telangana and Kerala, while it is cheapest in smaller states and UTs like Andaman & Nicobar Islands, Delhi and those in the North East, mainly due to differential in local sales tax or Value Added Tax (VAT) rates, oil industry data showed. The three state-owned fuel retailers - Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) - cut petrol and diesel prices by INR2 a litre each, ending a nearly two-year hiatus in price revision. That reduction brought relief to fuel users but rates continue to be above INR100 a litre mark in some states due to higher VAT. Commenting on the price cut, Goldman Sachs said the net marketing margin of the three oil marketing companies will decline to INR08-09 a litre from INR1.7-2.7 a litre.

Ahead of the announcement of the Lok Sabha election schedule, the Centre slashed prices of petrol and diesel by INR2 per litre. With the recent cuts in LPG and compressed natural gas (CNG) prices, speculation was rife that a reduction in petrol and diesel prices may be in the offing in view of the Lok Sabha (LS) polls. On an average, the price of petrol was INR94 per litre, while the price of diesel was INR87 per litre as on 14 March. According to Petroleum Minister Hardeep Singh Puri, a reduction in retail prices of petrol and diesel is a decision that would have to be thought through “very coolly” by public sector oil marketing companies (OMCs) in view of the volatility in the global energy market, geopolitical challenges, and the companies’ financial health. Indicating that the OMCs are not fully out of the woods yet in terms of profitability on fuel sales, the minister said that they are still incurring under-recoveries on diesel sales, but did not quantify it.


After delivering back-to-back innovations in fuel grades, IOC has set sight on the Grand Prix and will in next three months start producing fuel used in adrenaline-pumping Formula One or F1, motor racing. As per the IOC, the firm’s refinery at Paradip in Odisha will in three months produce the petrol used in F1 car racing. IOC controlling roughly 40 percent of fuel market share, will be the first Indian company and only a handful globally that will produce fuel used in F1 racing. The company expects to get its Formula 1 fuel certified in around three months, after which it will start competing with other global majors like Shell to supply it to the F1 teams. IOC had in October last year helped India join a select league of nations when it began producing highly specialised 'reference' petrol and diesel that are used for testing automobiles.


The government raised windfall tax on petroleum crude to INR4,900 a tonne from INR4,600 (US$55.14). The new rates will be affective, according to a government notification released. The tax is levied in the form of a Special Additional Excise Duty (SAED).  The SAED on the export of diesel, petrol and jet fuel or ATF, has been retained at nil. On 1 March, government hiked its windfall tax on petroleum crude to INR4,600 a metric tonne from INR3,300 and also cut the windfall tax on diesel to zero from 1.50 per litre.

ONGC in January started oil production from its Krishna Godavari basin KG-DWN-98/2 (KG-D5) block, lying in Andhra offshore. The field is producing some 12,000-12,500 bpd of oil currently, using a floating production and storage offloading (FPSO). The oil is stored on the FPSO, and once it reaches a critical level, it is transferred to a ship, which carries it to a refinery. MRPL received the first cargo, loaded on a ship Swarna Sindhu on 9 March. Crude oil was loaded on the ship in the Bay of Bengal, and it travelled around the southern tip of India to reach Mangalore on the west coast.


India’s import of Russian oil edged up in February over January, reversing declines seen in the past two months as refiners received some parcels of Russian light sweet Sokol grade. The world’s third biggest oil importer and consumer, India has been gorging on Russian oil since the West imposed sanctions on Moscow for its invasion on Ukraine in February 2022. Last month, Indian refiners imported 1.51 million bpd of Russian oil, a rise of about 2.8 percent from January. That was about 12.2 percent lower than the corresponding month a year ago. Russian oil made up about 32 percent of India’s overall oil imports in February, compared with 28 percent the previous month. India’s Russian oil imports in recent months were hit by payment problems and tougher US (United States) sanctions, targeting entities and ships involved in the sale of Russian crude at above the price cap of US$60 a barrel fixed by G7 nations.

BPCL has signed a deal with BP to buy 1 million barrels per month of US. BPCL would start taking delivery of the oil from June. BPCL has separately bought 2 million barrels of WTI (West Texas Intermediate) crude for loading in April via a spot tender. BPCL often buys US oil for its three refineries, which have a combined capacity to process 706,000 bpd of crude. BPCL is expected to process more crude in the next fiscal year starting in April compared with the current year, when it had shut its 156,000 bpd Bina refinery in central India for a month for maintenance. It had also shut units at its 120,000 bpd Mumbai refinery for maintenance.

Oil tanker Hafnia Seine bound for the US from BPCL’s crude import facility in an accident late. The tanker was carrying gasoline-blending fuel known as alkylate for Reliance Industries' US unit from a refinery in Jamnagar in Gujarat state. BPCL has a single point mooring at Sikka to import crude for its landlocked Bina refinery in central India.

The Reserve Bank of India (RBI) has asked the country’s major state-owned refiners to press Persian Gulf suppliers to accept at least 10 percent of oil payments in rupees in the next financial year. The government is worried that India’s booming demand for energy will put downward pressure on the rupee, and also wants to leverage the growth in consumption to its own advantage. The three refiners —IOC, BPCL and HPCL — have already approached oil exporters on the matter, but the suppliers are pushing back due to currency risk and conversion charges. The central bank has asked the Indian refiners to bear part of the currency transaction charges, but they are also resisting the idea on the grounds it will erode margins. India is the world’s third-largest crude importer and is forecast to be the leading driver of global consumption growth this decade.

Rest of the World


According to the International Energy Agency (IEA), shipping disruptions provide a short-term boost to the oil market with demand at 1.3 million bpd. Global oil demand is forecast to grow more than expected due to the rising fuel needs of ships rerouted away from the Red Sea amid attacks by Yemen’s Houthi rebels and a brighter economic outlook in the US, the IEA has said. In its monthly oil report, the Paris-based agency made a 110,000 bpd upward revision of global oil demand from its previous forecast as attacks by Yemen’s Iran-aligned Houthis in the Red Sea delay supplies. The disruptions have meant that nearly 1.9 billion barrels of oil were at sea at the end of last month, the IEA said, nearly the highest since the COVID pandemic.

According to the IEA’s oil markets and industry division, the global oil market is relatively well supplied with demand growth slowing, while supply is increasing from the Americas. OPEC+ members led by Saudi Arabia and Russia agreed to extend voluntary oil output cuts of 2.2 million bpd into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group. While oil demand last year grew by some 2.3 million bpd, the increase in 2024 is expected to be smaller, at 1.2 million to 1.3 million bpd. The IEA expects supply to grow to a record high of about 103.8 million bpd, almost entirely driven by producers outside OPEC+, including the US, Brazil and Guyana.

Africa & Middle East/ OPEC+

Iran sealed contracts worth billions of dollars with domestic companies to boost its oil production in the face of Western sanctions. The oil ministry and Iranian businesses signed deals worth US$13 bn to increase daily oil production in six major fields. In October, Iranian Oil Minister Javad Owji promised the country’s oil production would reach 3.6 million bpd by the end of the Persian year on 19 March. Iran’s oil sector suffered a blow in 2018 when Western sanctions were reimposed, forcing foreign companies to leave the country, after the United States withdrew from a landmark deal designed to curb Tehran's nuclear programme. Development contracts for Iran’s oldest oil field, Masjed Soleyman in Khuzestan, were also signed. First drilled in 1908, well No 1 in Masjed Soleyman is the oldest in the Middle East. According to United States Energy Information Administration (EIA), Iran was the world’s seventh-largest crude oil producer in 2022. It also holds the world’s third-largest proven oil reserves, behind Venezuela and Saudi Arabia, according to the EIA.

Top oil exporter Saudi Arabia may keep term prices of crude it sells to Asian customers little changed in April versus March following a slight rise in Middle East benchmark prices, traders said. The official selling price (OSP) of flagship Arab Light crude could stay unchanged or rise by 10-20 cents a barrel in April, according to a survey of six refining sources. Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Russia/Central Asia

Kazakhstan’s KazTransOil plans to increase exports of Tengizchevroil’s oil via the Baku-Tbilisi-Ceyhan pipeline to 140,000 tons in April from 130,000 tonnes in March. US Steel Corporation, which has agreed to be bought by Japan’s Nippon Steel for US$14.9 bn, must remain a domestically owned American firm, President Joe Biden said - expressing explicit opposition to the deal for the first time.

Russia’s energy ministry expected the country’s crude oil exports to increase due to unplanned maintenance at refineries. First Deputy Energy Minister Pavel Sorokin said that there was no concern about fuel supplies on domestic market. Russia has seen multiple outages at its refineries due to technical faults and drone attacks by Ukraine since the start of the year. Ukraine struck Russian oil refineries in a second day of heavy drone attacks, causing a fire at Rosneft’s biggest refinery in what President Vladimir Putin had said was an attempt to disrupt a presidential election. The country, the world’s second largest crude oil exporter after Saudi Arabia, had already introduced gasoline exports ban for six months to keep prices stable. Domestic gasoline prices are sensitive for motorists and farmers in the world's biggest wheat exporter ahead of the presidential election.

North & South America

Chevron will pay US$13.1 mn in settlement agreements with two California state agencies for past oil spills in Kern County, Bakersfield, the California natural resources agency said, as the major oil producing state strengthens regulations. Chevron, which has already paid for the cleanup costs for its oil spills in 2019, will pay US$5.6 mn to the California Department of Conservation, and US$7.5 mn to California Department of Fish and Wildlife (CDFW), the agency said. Chevron spilled a minimum of 800,000 gallons of oil and water into a creek bed in Kern county in 2019. CDFW documented over 70 oil spills between 2018 and 2023 in Kern County attributable to Chevron, which accounted for more than 446,600 gallons (10,633 barrels) of oil spilled. The state of California has seen multiple oil spills starting from a devastating oil well blowout in Santa Barbara in 1969 to Amplify Energy’s offshore spill in 2021 that required it to pay US$50 mn in settlements.

US EIA predicted that domestic oil production will grow by 260,000 bpd in 2024, up 90,000 bpd from its previous forecast, but said estimated production cuts from OPEC+ will still slow global oil growth. US crude oil production will rise to 13.19 million bpd this year, the EIA said. It had previously projected that crude production would rise this year by 170,000 bpd. US crude oil output reached a record 13.3 million bpd in December 2023, following sustained productivity increases at new wells. Production notched an annual record of 13.21 million bpd in 2023. US oil production is expected to rise by 460,000 bpd to 13.65 bpd in 2025, which would be a record high.

Argentina’s national oil company YPF said it would invest US$3 bn of a US$5 bn capital spending plan this year in shale, as it looks to generate more cash by exiting some major conventional fields. The company had previously said it would exit from some 55 conventional mature blocks as it looks to focus on its more profitable shale operations. By 2025, CEO  Horacio Marin said he expects shale oil output to reach 160,000 bpd after boosting production 24 percent in 2024 and a further 35 percent the following year. By 2027, the company could produce some 250,000 bpd.

Cenovus Energy, Canada’s third-largest oil producer, said it plans to boost energy production by 19 percent during the next five years as the country's pipeline capacity expands. Canada’s heavy oil sells at a discount to the North American benchmark in part because of limited export pipeline capacity. Expansion of the Canadian government-owned Trans Mountain pipeline, expected to be completed in the second quarter, will expand shipping to refineries on the US West Coast and in Asia. Canadian oil producers are modestly expanding output to take advantage of the expansion, which will nearly triple Trans Mountain’s capacity to 890,000 bpd.

A measure in the US funding legislation unveiled by congressional leaders would block China from buying oil from the Strategic Petroleum Reserve (SPR). The desire for a hard line on China is one of the few truly bipartisan sentiments in the deeply divided US Congress, and lawmakers have introduced dozens of bills seeking to address competition with China’s government. The issue of SPR sales to China heated up after President Joe Biden, a Democrat, announced in 2022 a sale of 180 million barrels of SPR oil to tame gasoline prices that spiked after Russia's invasion of Ukraine.

Asia Pacific

Chinese offshore oil and gas major CNOOC had filed an arbitration claim to establish a right over Hess' stake in the giant Guyana oilfield Stabroek in the event of the US firm's sale to Chevron. Exxon and Chevron are in talks over Exxon's claim that it has a right of first refusal on any sale of the Stabroek block, a giant field off the coast of Guyana that contains at least 11 billion barrels of oil. Stabroek is the prize in Chevron’s US$53 bn bid for Hess. It is the site of the largest oil discoveries in almost two decades and is expected to produce more than 1.2 million barrels of oil and gas per day by 2027.

China’s imports of crude oil rose in the first two months of the year compared with the same period in 2023, but they were also weaker than the preceding months, continuing a trend of softening purchases by the world’s biggest buyer. Customs data showed crude imports of 88.31 MT in the January-February period, up 5.1 percent from the same period in 2023. However, on a bpd basis, the increase was only 3.3 percent, given the extra day this year in February for the quadrennial leap year. China’s crude imports in 2023 peaked in August at 12.43 million bpd, which was the second-highest on record, and although there has been some volatility in the monthly data since then, the overall trend is toward lower arrivals.

News Highlights: 27 March – 2 April 2024

National: Oil

Marginal cut in jet fuel price, commercial LPG rate reduced by INR30.50

1 April: Jet fuel or ATF (aviation turbine fuel) price was cut by a marginal 0.5 percent while rates of commercial LPG (liquefied petroleum gas) used by establishments such as hotels and restaurants were slashed by INR31 per cylinder in line with international prices. ATF price was cut by INR502.91 per kilolitre (kl) or 0.49 percent, to INR100,893.63 per kl in the national capital, according to a price notification of state-owned fuel retailers. Rates in Mumbai have been cut to INR94,466.41 per kl from INR94,809.22. Prices differ from state to state depending on the incidence of local taxes. Alongside, oil firms cut the price of commercial LPG by INR30.5 to INR1,764.50 per 19-kg cylinder. Rates of the cooking gas used in domestic households however remained unchanged at INR803 per 14.2-kg cylinder. This is the first reduction in commercial LPG prices since January. Rates had gone up Rs 14 per cylinder on 1 February and INR25.5 on 1 March. Also, the price of the 5 kg FTL (Free Trade LPG or market priced cooking gas) cylinder has been lowered by INR7.50. Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) revise prices of ATF and cooking gas on 1st of every month based on the average price of benchmark international fuel and foreign exchange rate.

Two-day petrol pump strike scheduled to begin in Assam, deferred

30 March: The petrol pump strike in parts of Assam, scheduled to begin, was deferred, North East India Petroleum Dealers' Association (Greater Guwahati Unit) said. The association had called for 'no purchase no sale' over a host of demands. Among their demands was the revision of the dealers' commission, which has been pending since 2017. The announcement came hours after the state government brought petroleum dealers and retailers under the Essential Services Maintenance (Assam) Act or ESMA, which prohibits strikes.

Chennai refinery expansion cost goes up over INR36 bn: IOC

28 March: Indian Oil Corporation (IOC) said it will raise its stake in the joint venture building a 9 million tonnes (MT) refinery at Chennai to 75 percent after the cost to the project escalated by over 12 percent. Originally, IOC and its subsidiary Chennai Petroleum Corporation Ltd (CPCL) were to hold a 25 percent stake in the joint venture that was to build a new unit adjacent to the existing refinery of CPCL. The cost increased INR36.62 billion or 12.5 percent. IOC said its board had on January 29, 2021 approved the implementation of a 9 million tonnes a year refinery at Cauvery Basin, Nagapattinam in Tamil Nadu by CPCL at an estimated cost of INR293.61 billion, to meet the demand of petroleum products in southern India. IOC had planned to pull down the 1 MT a year Nagapattinam refinery of its subsidiary CPCL and build the brand new 9 MT unit.

National: Gas

Gas price for RIL trimmed to US$9.87; rate for gas that feeds CNG, PNG supplies still at US$6.5

31 March: The government on 31 March cut the price of natural gas produced from difficult areas like deep sea KG-D6 block of Reliance Industries Ltd (RIL), marginally to US$9.87 per million metric British thermal units (mmBtu) in line with softening of benchmark international gas prices. However, the price of gas that is used for making CNG for fuelling automobiles or piping to household kitchens for cooking purposes will remain unchanged due to a price cap that is set at 30 percent less than market rates such as that paid to RIL. For the six-month period starting 1 April, the price of gas from deepsea and high-pressure, high-temperature (HPTP) areas has been cut to US$9.87 per mmBtu from US$9.96, oil ministry’s Petroleum Planning and Analysis Cell (PPAC) said in a notification. This is the third straight bi-annual reduction in rates for difficult fields. Price was for six months beginning 1 October 2023 slashed 18 percent to US$9.96 per mmBtu from US$12.12 for the April to September 2023 period. Prior to that, the rate was a record US$12.46 for October 2022 to March 2023. The government bi-annually fixes prices of the locally-produced natural gas -- which is converted into CNG for use in automobiles, piped to household kitchens for cooking and used to generate electricity and make fertilisers. Two different formulas govern rates paid for gas produced from legacy or old fields of national oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), and for newer fields lying in difficult-to-tap areas, such as deepsea. Rates are fixed on 1 April and 1 October each year.

National: Coal

Coal India expected to record 773.7 MT output in FY'24

2 April: It is anticipated that Coal India Ltd will report a production figure of approximately 773.7 million tonnes (MT) for the fiscal year 2023-24, representing a nearly 10 percent increase compared to the previous year. However, they suggested that this would fall short of the target of 780 MT. Coal offtake is expected to be around 753 MT, which is approximately 90 percent of the target of 780 MT. Coal India Chairman P M Prasad indicated a projected shortfall due to some land-related production hurdles in South Eastern Coalfields. The largest coal producer in the world achieved its highest-ever production of 703.2 MT in the fiscal year 2022-23. The target for the next fiscal year had been set at 838 MT. Projections suggested that coal demand is expected to increase from 1,180 MT in 2023-24 to 1,464 MT in 2029-30.

Government directs imported coal-based plants to operate at full capacity till September

2 April: The power ministry said that it has directed imported-coal based (ICB) power plants to continue operating at full capacity till September 2024. Besides, the ministry will also meet with officials of gas-based power plants to review their operationalisation during the peak demand summer season (April-June). Power Minister R K Singh held a review meeting with top officials on the power supply and demand situation in the country. Power supply planning assumes importance as the India Meteorological Department (IMD) predicts extreme heat conditions during April to June with Central and Western India likely to face the worst impact. In October last year, the ministry mandated ICB plants to run at full capacity till June 2024.

National: Power

Telangana well prepared to meet peak power demand in April-May: Deputy CM

2 April: The Congress government in Telangana is well prepared to meet the peak electricity demand of the state during the April-May summer months, Deputy Chief Minister (CM) Mallu Bhatti Vikramarka asserted as he accused opposition BRS of spreading “lies” about power cuts. He said that the state’s discoms (distribution companies) have already tied up for the required quantum of power through long-term and short-term contracts. The state’s power sector was neglected under the previous Bharat Rashtra Samithi (BRS). The peak power demand has been around 14,000-15,000 megawatt (MW) since the last two weeks and it is expected to be around the same till mid-April. He said the peak demand is estimated to be 15,000 MW in April, while 11,000 MW in May. The availability of energy is almost at par with the average daily requirement of 265 million units per day in April and 230 million unit per day in May, he said. Discoms have entered into contracts for supply of 1,000 MW through power exchanges on round-the-clock basis till April 20 and for bilateral banking of 238 MW from Punjab till 15 April, he said. The Centre has allocated 180 MW of additional power till 15 April following the state government’s request. He mentioned that the power supply position has improved significantly since December 2023. The maximum peak load met was 15,623 MW on 8 March.

India’s power consumption subdued at 1.4 percent to 129.89 bn units in March

1 April: India’s power consumption growth remained subdued at 1.4 percent to 129.89 billion units in March as compared to the year-ago period mainly due to pleasant weather, according to government data. In March 2023, power consumption stood at 128.12 billion units, lower than 128.47 billion units recorded in the same month a year earlier, the data showed. The highest supply in a day (peak power demand) rose to 221.70 GW (gigawatt) in March 2024 as opposed to 208.92 GW in March 2023 and 199.43 GW in March 2022. The experts said power consumption as well as demand growth remained subdued in March as the weather remained pleasant across the country and people did not feel the need for heating or cooling appliances, especially in north India. The power ministry has estimated around 260 GW of peak demand during summer. The experts said power demand as well as consumption will see robust growth April onwards with the onset of summer. The power ministry had estimated the country’s electricity demand to touch 229 GW during summer in 2023, but it did not reach the projected level in April-July due to unseasonal rainfall. Peak supply, however, touched a new high of 224.1 GW in June before dropping to 209.03 GW in July.

Tamil Nadu breaks power consumption record

31 March: A week after the peak power demand in the state recorded an all-time high of 19,409 megawatt (MW) at noon on 22 March, the overall 24-hour power consumption breached the previous record with 426.439 million units, 26.5 lakh units higher than the peak of 423.785 million units on 20 April 2023. The demand crossed 19,204 MW. The power demand was met without any difficulty, TANGEDCO (Tamil Nadu Generation and Distribution Corporation Ltd) said. Tamil Nadu broke power consumption records in March with a peak demand of 19,409 MW. The state anticipates crossing 21,000 MW in April, with increased consumption due to rising temperatures and changes in peak demand patterns. Tamil Nadu’s electricity demand reaches a record high of 19,409 MW, driven by increased fan and air conditioner use due to rising temperatures.

India renews agreement to export electricity to Nepal for next 3 months

29 March: At a time when Nepal is facing a power crisis, India renewed the agreement to export electricity to Nepal for the next three months. Under the agreement, which was to expire on 31 March, Nepal can import a total of 554 MW (megawatt) electricity from India between 6 am and 6 pm. Nepal’s domestic electricity production currently stands at around 1,200 MW while the country's demand for electricity is 1,800 MW to 2,000 MW during this period. Nepal is experiencing a shortage of electricity as most of the domestic power plants in the country are based on a run-of-the-river system and during winter, there is less water in the rivers. The Himalayan nation can import 500 MW of electricity from the Dhalkebar-Muzaffarpur cross-border transmission line and 54 MW through Tanakpur.

National: Non-Fossil Fuels/ Climate Change Trends

India’s hydropower output records steepest fall in nearly four decades

1 April: India's hydroelectricity output fell at the steepest pace in at least 38 years during the year ended 31 March, an analysis of government data showed, as erratic rainfall forced further dependence on coal-fired power amid higher demand. The 16.3 percent drop in generation from India’s biggest clean energy source coincided with the share of renewables in power generation sliding for the first time since Prime Minister Narendra Modi made commitments to boost solar and wind capacity at the United Nations climate talks at Paris in 2015. Renewables accounted for 11.7 percent of India’s power output in the year that ended in March, down from 11.8 percent a year earlier, an analysis of daily load despatch data from the federal grid regulator Grid-India showed. India is the world’s third-largest greenhouse gas emitter, and the government often points to lower per-capita emissions compared to developed nations to defend rising coal use. Hydropower’s share in India’s total power output fell to a record low of 8.3 percent during the fiscal year ended 31 March, Grid-India data showed, compared with an average of 12.3 percent in the 10 years through 2020. India missed a 2022 target to install 175 gigawatt (GW) of renewable energy, and remains 38.4 GW short of that goal, with Grid-India data showing India's dependence on fossil fuel for power hit a five-year high of 77.2 percent in 2023/24. India’s addition of renewables slowed to a five-year low in 2023. Hydro output in India, the sixth-biggest hydropower producer, fell nearly seven times faster than the global average, Ember data showed.

TP Saurya commissions 200 MW solar power project in Bikaner

1 April: TP Saurya (TPSL), a subsidiary of Tata Power Renewable Energy (TPREL), announced the successful commissioning of a 200 MW (megawatt) solar project located in Bikaner, Rajasthan, for Tata Power Trading Company, a subsidiary of Tata Power Company. Expected to generate an impressive 485 million units of energy annually, the project aligns with the Company's mission to drive substantial contributions to India’s renewable energy capacity.

Adani Total Gas starts production at UP biogas plant

1 April: Adani TotalEnergies Biomass Ltd (ATBL), a wholly-owned subsidiary of Adani Total Gas Ltd (ATGL), said it has commissioned operations at Phase 1 of its Barsana Biogas Plant, located at Mathura in Uttar Pradesh (UP). The Barsana Biogas Project would attain overall capacity of 600 tons per day (TPD) of feedstock, generating over 42 TPD of CBG and 217 TPD of organic fertiliser upon full commissioning. The company claimed that the plant will be India’s largest agri waste-based bio CNG plant after reaching full design capacity at Phase 3.

Torrent Power gets order to supply 150 MW renewable energy for INR18 bn

28 March: Torrent Power said it has received a letter of award from its 'Distribution Unit' for setting up a 150 MW (megawatt) wind solar hybrid project with an investment of INR18.25 billion. The renewable energy project will supply power at a tariff of INR3.65 per kWh. The project will be commissioned within 24 months from the signing of Power Purchase Agreement (PPA). The contract for supply of power will be 25 years from the commissioning of the project. The annual CUF (capacity utilisation factor) will not be less than 50 percent for any year during the term of the PPA and rated power capacity of wind and solar will be in the ratio of 2:1. To meet the 50 percent CUF requirement, the company plans to install 245 MW of wind and solar capacity projects against a contracted capacity of 150 MW, it said.

Adani Green Energy commissions 180 MW solar power project at Jaisalmer

27 March: Adani Solar Energy RJ Two, wholly-owned stepdown subsidiary of Adani Green Energy (AGEL) has operationalized 180 MW (megawatt) of solar power project at Devikot in Jaisalmer, Rajasthan. With operationalization of this plant, AGEL’s total operational renewable generation capacity has increased to 9,784 MW, in its journey of 45 GW (gigawatt) capacity by 2030.

Varanasi tops UP in solar energy targets

27 March: Varanasi is leading in energy and environmental conservation initiatives in Uttar Pradesh (UP). Government’s endeavour to transform Varanasi into a solar city is gaining momentum and promising significant savings in both electricity and finances while prioritizing environmental protection. Under ‘Har Ghar Solar Yojana’, over 28,000 registrations for solar rooftop grid systems have been done in just 2.5 months, surpassing the targeted 25,000 connections.

International: Oil

Giant Kazakh oil field operator denies spill reports

2 April: The operator of Kazakhstan’s giant offshore Kashagan oilfield denied reports of an oil spill near the field and said its facilities were working normally. Globus, an ecological organisation in the Central Asian nation, said that satellite imagery had captured a large oil spill in the northern Caspian Sea near Kashagan. Kashagan, one of Kazakhstan’s largest oil fields, is being developed by the North Caspian Operating Company (NCOC) consortium, which includes Shell Eni, TotalEnergies and Exxon Mobil. The ecology department of Kazakhstan’s Atyrau region, which borders the Caspian, has also said it would conduct a visual inspection and take samples at the oil production site.

ADNOC cuts Upper Zakum oil exports sharply after diverting supply to refinery

1 April: Exports of Upper Zakum crude from the United Arab Emirates fell sharply in March after ADNOC diverted more supply to its own refinery and boosted shipments of its lighter Murban oil, according to traders, analysts and shipping data. The swap in oil grades at Abu Dhabi National Oil Company (ADNOC)’s Ruwais refinery has tightened medium-sour crude supply in Asia, limiting the number of Upper Zakum cargoes that can be delivered during S&P Global’s price assessment process for Middle East crude Dubai and supporting the benchmark. In 2018, ADNOC invested US$3.5 billion to upgrade its 837,000 barrel per day (bpd) refinery to process up to 420,000 bpd of heavier and more sour crude including Upper Zakum, according to the company. ADNOC started shipping Upper Zakum crude to its refinery in September, with volumes reaching 200,000 to 300,000 bpd in February and March, according to traders.

Petrol prices in Pakistan hiked by PKR9.66 per litre, surges to PKR289.41 per litre

1 April: Pakistan’s government has increased the price of petrol by PKR9.66 per litre amidst inflation. Petrol prices rose to PKR289.41 per litre from the previous PKR279.75, while high-speed diesel (HSD) decreased by PKR3.32 to PKR282.24 per litre. The adjustment, effective 1 April, was announced by the ministry of finance following a recommendation from the Oil and Gas Regulatory Authority (Ogra). The ministry attributed the change to fluctuations in international petrol and HSD prices, aligning with the government's policy to reflect global market variations domestically. The government maintained petrol prices at PKR 279.75 per litre and reduced HSD prices by PKR1.77 to PKR285.56 per litre. Petrol prices were expected to rise due to increased import premiums and global prices, while HSD prices decreased internationally. Pakistan State Oil (PSO)’s import premium remained at USD6.50 per barrel for HSD, leading to an estimated decrease of PKR1.30 to PKR2.50 per litre. The Pakistan government already levies a petroleum development levy (PDL) of PKR60 per litre, with a target of collecting PKR869 billion in PDL during the fiscal year.

OPEC oil output falls in March, led by Iraq

1 April: Organization of the Petroleum Exporting Countries (OPEC) oil output fell, a survey found, reflecting lower exports from Iraq and Nigeria against a backdrop of ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance. The OPEC pumped 26.42 million barrels per day (bpd), down 50,000 bpd from February, the survey, based on shipping data and information from industry sources, found.

Russian oil arrives in Cuba after year-long hiatus

31 March: Cuban media said at the weekend that 90,000 metric tonnes of Russian oil had arrived in the cash and fuel-short country to help alleviate power outages and gasoline shortages. In 2022, Russia resumed some oil shipments to the Communist-run Caribbean island after they ceased with the collapse of the Soviet Union. However, according to shipping data no Russian oil left the country for Cuba last year even as Russian media reported in June an agreement was reached between the two governments to supply 1.64 million metric tonnes of oil and derivatives annually. According to Energy and Mines Minister Vicente de la O Levy, the Communist-run country needs 8 million metric tonnes of oil and equivalents annually, of which 3 million tonnes are produced locally. Venezuela is Cuba’s main supplier of oil, but shipments have declined in recent years. Last year Mexico exported significant amounts of oil to Cuba but has not done so this year.

US, South Korea set up task force to block North Korea oil shipments

27 March: The United States (US) and South Korea launched a new task force aimed at preventing North Korea from procuring illicit oil, as deadlock at the United Nations (UN) Security Council (UNSC) casts doubts over the future of international sanctions. The two sides expressed concern over the possibility of Russia providing refined oil to North Korea, and discussed ways to suspend illegal cooperation between Moscow and Pyongyang. Under UNSC restrictions imposed over North Korea’s nuclear weapons and missile programs, Pyongyang is limited to importing 4 million barrels of crude and 500,000 barrels of refined products a year. A UN expert panel that monitors implementation of sanctions said that North Korean-flagged tankers may have delivered more than 1.5 million barrels of refined oil products between 1 January and 15 September last year

International: Gas

Saudi Aramco awards US$7.7 bn in contracts for Fadhili gas expansion

2 April: Saudi Aramco has awarded US$7.7 billion in contracts to expand its Fadhili gas plant’s processing capacity to 4 billion standard cubic feet per day, the company said. The plant currently has capacity to process 2.5 billion standard cubic feet per day. The expansion is expected to be completed by November 2027. The kingdom is working on developing its unconventional gas reserves, which require advanced extraction methods such as those used in the shale gas industry. It is also looking at investing in liquefied natural gas (LNG) projects abroad, having made its first foray last year by buying a minority stake in MidOcean Energy for US$500 million.

Russia’s Arctic LNG 2 suspends gas liquefaction amid sanctions, lack of tankers

2 April: Novatek, Russia’s largest producer of liquefied natural gas (LNG), has suspended production at its Arctic LNG 2 project due to sanctions and a shortage of gas tankers. The project had been hoping to start commercial deliveries in the first quarter of this year. But plans were complicated last year when it was included in Western sanctions over Russia’s conflict in Ukraine, prompting foreign shareholders to freeze participation and Novatek to issue a force majeure. The decision to suspend converting natural gas to LNG is a blow to Russia's goal to capture a fifth of the global LNG market by 2030-2035. It is currently the world's fourth-largest LNG producer with annual exports of 32.6 million metric tonnes.

Japan’s Mitsui to develop Vietnam gas field for US$740 mn

29 March: JAPANESE trading house Mitsui & Co said it has reached a final investment decision to develop Vietnam’s Block B gas field, with its share of development cost of about US$740 million. The project, 330 km off south-west Vietnam, will comprise a gas field and a pipeline linking it to a gas-fired thermal power plant. Mitsui is making the investment through its unit Mitsui Oil Exploration (MOECO).  Gas production capacity from the field is estimated at 490 million cubic feet per day, with output slated to start by the end of 2026, Mitsui said. The project will also include a midstream development for gas transportation. Two joint ventures of MOECO and the Japan Organization for Metals and Energy Security hold a 23 percent stake in the gas field, while another MOECO subsidiary owns a 15 percent stake in the planned pipeline.

International: Coal

China, India boost seaborne thermal coal imports as power demand surges

2 April: China and India lifted imports of seaborne thermal coal to three-month highs in March as the world’s two biggest buyers took advantage of lower international prices of the fuel to meet strong domestic power demand. China, the world’s biggest coal producer and importer, saw arrivals of seaborne thermal coal of 29.7 million metric tonnes in March, according to commodity analysts Kpler data. For the first quarter, China’s seaborne imports of the grade of coal used mainly to generate electricity were 80.64 million tonnes (MT), up 17.2 percent from the 68.82 million recorded in the same period in 2023. The strength in China’s imports is being driven by a combination of strong growth in power demand and by seaborne prices being competitive with domestic coal. China’s domestic coal prices have also remained relatively high with thermal coal at Qinhuangdao ending at 825 yuan (US$114) a tonne. The competitiveness of seaborne grades can be seen in China’s imports, with arrivals of 20.24 MT of Indonesian thermal coal in March, up from 16.96 million in February. India’s top supplier of seaborne thermal coal is Indonesia with March arrivals of 10.23 MT being the highest in four months. Australia isn’t a major supplier of thermal coal to India, with most of the coal trade between the two countries being metallurgical coal, which is used to make steel.

International: Non-Fossil Fuels/ Climate Change Trends

China could drive Africa’s renewable energy revolution

2 April: China has a unique opportunity to drive forward an energy revolution in Africa, but it must first reverse nearly two decades of neglect of green power investments there, research from Boston University showed. Three years ago, China’s President Xi Jinping said the country would not build new coal-fired power projects abroad, pledging to deal with climate change by supporting the development of green and low-carbon energy. Although Africa’s green energy potential is one of the highest in the world, Chinese lending and investment has so far provided relatively little support for the continent’s energy transition, according to a report from Boston University’s Global Development Policy Center and the African Economic Research Consortium. Lending for renewables, such as solar and wind, from China's two main development finance institutions constituted just 2 percent of their US$52 billion of energy loans from 2000 to 2022, while more than 50 percent is allocated to fossil fuels.

Brazil’s Petrobras subsidiary to push for renewables in terminals

2 April: Transpetro, the logistics arm of Brazil’s oil firm is analyzing projects to supply all its 48 terminals with renewable energy, the subsidiary’s director of ducts and terminals Marcio Guimaraes said, ahead of the inauguration of a solar plant in Sao Paulo state. The plant, set to be operated by Transpetro, will supply enough energy to Brazil’s national grid to account for all operations at Transpetro’s terminal in Guarulhos International Airport, said Guimaraes. Petrobras has put a big bet on renewables as part of its plan to shift from an oil company to an energy firm, in line with President Luiz Inacio Lula da Silva’s wish to kickstart Brazil’s energy transition.

Australia to create US$653 mn fund to expand solar panel manufacturing

28 March: Australia will set up an A$1 billion (US$653 million) fund to help expand solar panel manufacturing at home, Prime Minister Anthony Albanese said, as it looks to ramp up its transition to renewable energy from coal power. Albanese’s centre-left Labor government has been boosting spending to underwrite new wind, solar and battery projects with more than A$40 billion of investment committed since coming to power in 2022. The government is targeting 82 percent renewable power by 2030 in the energy grid from around 40 percent now. One in three Australian homes have installed roof solar panels, the highest uptake in the world, but only 1 percent of those are manufactured in the country.

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 2023 is the twentieth 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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