India’s oil imports at near 3 year high in December

Source: The Economic Times, Jan 19, 2021

NEW DELHI: India‘s crude oil imports in December soared to the highest levels in nearly three years to more than 5 million barrels per day (bpd) as its refiners cranked up output to meet a rebound in fuel demand, data from trade sources showed.

India’s year-end rush for crude supplies coincided with stronger demand from north Asian buyers during winter, boosting prices and an accelerating de-stocking of floating storage globally.

December oil imports by India, the world’s third biggest crude importer and consumer, were about 29% more than the previous month and about 11.6% higher than a year earlier, the data showed, after fuel consumption rose for a fourth straight month to an 11-month high in December.

“India’s refinery utilisation rates are also nearing full capacity and probably refiners are replenishing inventory anticipating higher prices during winter,” said Ehsan Ul Haq, analyst with Refinitiv.

“This is the harbinger of a recovery in fuel demand and improving refining margins.”

However, India’s annual crude imports declined by about a tenth in 2020 from the previous year to 4.04 million bpd, the lowest in five years, data compiled by Reuters showed.
The share of India’s imports from the Organization of the Petroleum Exporting Countries, including supplies from the Saudi-Kuwait Neutral Zone, fell to a record low of 67% in December. OPEC‘s average share for the first nine months of India’s current fiscal year which ends in March was about 74%.

While India cut back imports from Middle Eastern, African and U.S. oil in December from the previous month, it marginally lifted its intake of Latin American and Caspian Sea oil.

In December, Iraq remained the top oil supplier to India followed by Saudi Arabia, United Arab Emirates. Nigeria emerged as the fourth biggest supplier, pushing the United States down to the sixth position just after Brazil.

India plans $60-bn investment in gas infrastructure: Dharmendra Pradhan

Source:  Economictimes.com 17 Dec, 2020

New Delhi: Petroleum Minister Dharmendra Pradhan on Thursday said the government has planned a USD 60-billion investment for creating gas infrastructure in the country till 2024, and gas’ share in the energy mix is expected to rise to 15 per cent by 2030. Currently, gas accounts for 6 per cent in the country’s total energy mix.

Speaking at Assocham Foundation Day Week 2020, the minister said, “On the investments front, we have envisaged a spend of USD 60 billion in creating gas infrastructure till 2024, including for pipelines, LNG terminals and CGD (city gas distribution) networks.”

He further told, “We are ushering a gas-based economy by increasing the share of natural gas in India’s primary energy mix from 6.2 per cent to 15 per cent by year 2030.”

India’s first automated national-level gas trading platform was launched in June this year to promote and sustain an efficient and robust gas market and foster gas trading in the country.

Coverage of CGD projects are being expanded to 232 geographical areas spread over 400 districts, with potential to cover about 53 per cent of the country’s geography and 70 per cent of population, he added.

He also said, “We are adopting clean mobility solutions with greater use of LNG (liquefied natural gas) as a transportation fuel, including long haul trucking. We plan to have 1,000 LNG fuel stations across the country. Last month, foundation stone was laid for the nation’s first 50 LNG fuel stations.”

This year, India has achieved the milestone of completely filling all the strategic petroleum reserves with a total capacity of 5.33 MT (million tonnes) constructed at Visakhapatnam, Mangaluru and Padur.

“We have initiated the process of establishing another 6.5 MT commercial-cum-strategic petroleum storage facilities at two locations, Chandikol and Padur, under the public-private partnership model,” he added.

About the pandemic, he noted that the COVID-19 pandemic continues to inhibit conduct of normal activity.

He said, “We also have clear indications of improvements and a gradual increase in activity across all states and sectors of our economy. You are already reworking the traditional strategies, not just to mitigate the effects of the pandemic but to build back better.”

Pradhan added that there is a reflection of these efforts in how India’s energy sector has bounced back with remarkable resilience. “Our energy demand has almost recovered back to pre-COVID-19 levels, particularly for petroleum products. We are confident that this recovery path in energy demand growth in India will sustain in the coming months.”

Vedanta Group Chief Executive Officer Sunil Duggal said that during the session, “We contribute 15 per cent to domestic crude oil production which would be raised to 50 per cent by 2030… It can add Rs 1 lakh crore to the central government (revenue) kitty.”

He suggested that the industry should be given more freedom with additional reforms in the sector which would ultimately help realise the goal of USD 5-trillion economy and an Aatmanirbhar (self-reliant) India.

Sumant Sinha, vice-president of Assocham and chairman & managing director of ReNew Power, stressed the need for more research and development in the energy sector to make economy more sustainable, and called for more investment in the area.

India set to lose Farzad-B gas field; Iran to prefer domestic companies over foreign firms

Source: The Economic Times, Oct 18, 2020

New Delhi: India has all but lost the ONGC Videsh Ltd-discovered Farzad-B gas field in the Persian Gulf after Iran decided to prefer domestic companies over foreign firms for development of the field, sources said.

ONGC Videsh Ltd (OVL), the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), had in 2008 discovered a giant gas field in the Farsi offshore exploration block.

OVL and its partners had offered to invest up to USD 11 billion for development of the discovery, which was later named Farzad-B.

After sitting over OVL’s proposal for years, the National Iranian Oil Co (NIOC) informed the firm in February this year about its intention to conclude the contract for Farzad-B development with an Iranian company, sources with direct knowledge of the development said.

OVL, however, continued its engagements with NIOC over the development of the field and sought terms and conditions of the proposed contract for its evaluation, they said, adding that Iran has so far not responded to the Indian firm’s request.

Farzad-B holds total reserves of around 21.7 trillion cubic feet of which around 60 per cent is recoverable, and production is slated to be around 1.1 billion cubic feet per day.
Sources said unconfirmed information suggests that Iran has identified a local firm for the development of the field, but OVL has not yet given up hopes and continues to chase Iranian authorities for the contract.

The 3,500 square kilometre Farsi block sits in water depth of 20-90 metres on the Iranian side of the Persian Gulf.

OVL, with 40 per cent operatorship interest, signed the Exploration Service Contract (ESC) for the block on December 25, 2002. Other partners included Indian Oil Corp (IOC) with 40 per cent stake and Oil India Ltd (OIL) holding the remaining 20 per cent stake.

OVL discovered gas in the block, which was declared commercially viable by NIOC, on August 18, 2008. The exploration phase of the ESC expired on June 24, 2009.

The firm submitted a Master Development Plan (MDP) of Farzad-B gas field in April 2011 to Iranian Offshore Oil Company (IOOC), the then designated authority by NIOC for development of Farzad-B gas field.

A Development Service Contract (DSC) of Farzad-B gas field was negotiated till November 2012, but could not be finalized due to difficult terms and international sanctions on Iran.

In April 2015, negotiations restarted with Iranian authorities to develop Farzad-B gas field under a new Iran Petroleum Contract (IPC). This time, NIOC introduced Pars Oil and Gas Company (POGC) as its representative for negotiations.

From April 2016, both sides negotiated to develop Farzad-B gas field under an integrated contract covering upstream and downstream, including monetization/marketing of the processed gas. However, negotiations remained inconclusive.

Meanwhile, on the basis of new studies, a revised Provisional Master Development Plan (PMDP) was submitted to POGC in March 2017, sources said, adding that in April 2019, NIOC proposed development of the gas field under the DSC and offtake of raw gas by NIOC at landfall point.

However, due to imposition of US sanctions on Iran in November 2018, technical studies could not be concluded which is a precursor for commercial negotiations.

The Indian consortium has so far invested around USD 400 million in the block.

Coronavirus and taxes eat away at diesel’s edge over gasoline in India

Source: LiveMint.com, Oct 12, 2020

For decades, diesel has underpinned India’s economic growth and the fortunes of its refiners, but the pandemic has caused the nation’s most consumed fuel to lose some of its luster.

Since Covid-19-lockdowns have eased across India, diesel consumption has trailed the rebound in gasoline with trucks remaining idle amid a softer economy. Motor fuel use, however, has benefited from people choosing their own cars and scooters over public transport to avoid the risk of infection.

While diesel is still king in India — fuel sales are double that of gasoline — the uneven demand recovery has created a unique challenge for India’s refiners, just as more headwinds emerge from the use of hydrogen and natural gas in major guzzlers such as trucks and buses.

“Personal mobility over public transport has supported gasoline, but diesel is getting knocked-out across the sectors,” said Senthil Kumaran, head of south Asia oil at industry consultant FGE. “It’s a structural shift in trends that we are witnessing. The refining system is caught at the crossroads, but it will gradually adjust to the change.”

Refiners are expected to focus on making less diesel and more gasoline and petrochemicals to respond to changing demand. Reliance Industries Ltd. has flagged a shift away from transport fuels, while Indian Oil Corp. has signaled greater diversification to reduce its dependence on its fuels business. The country’s biggest processor also plans to roll out a fleet of buses powered by a blend of hydrogen and compressed natural gas.

Indian Oil Corp.’s foray into hydrogen-powered public transport follows a push by the government encouraging the use of cleaner fuels for buses and trucks, which consume more than half of the nation’s diesel. The railway that moves millions of people a day around the country is also getting somewhat greener, with the country seeking to convert its entire network to run on electricity by 2024, rather than diesel, according to railways minister Piyush Goyal.

Price Pain

The price advantage of once cheap diesel has also faded. The fuel now costs almost as much as gasoline in some Indian states after being saddled with new taxes over the past six years, prompting some farmers to come up with novel alternatives such as liquefied petroleum gas to run water pumps. Farms account for more than eighth of total diesel consumption in India.

The demand shift related to the pandemic and broader energy transitioning means refineries that predominantly produce diesel will need to rethink their current output of products, said B. Anand, chief executive officer at Nayara Energy Ltd., India’s second-biggest private refiner.

Gasoline sales in September rose for the first time since February on a year-on-year basis as more people opted for their own vehicles to commute. While diesel consumption is lagging and not expected to rebound from the impact of the virus until year-end, Indian Oil Corp. Chairman Shrikant Madhav Vaidya sees demand for the fuel enduring for at least another couple of decades. “There’s a huge appetite to consume more energy,” he said. Transport fuels will continue to dominate until at least 2040, he added.

Government allows complete marketing freedom for natural gas

Source: The Economic Times, Oct 07, 2020

New Delhi: The government on Wednesday allowed complete marketing freedom for natural gas produced from non-regulated fields, including sale to affiliate companies. The Union Cabinet, headed by Prime Minister Narendra Modi, approved a standard e-bidding procedure to discover price of gas.

While producers will continue to be barred from participating in such auctions, affiliates would be allowed to bid, Oil Minister Dharmendra Pradhan told reporters here.

However, the existing pricing mechanism for gas produced by state-owned ONGC and Oil India Ltd from fields given to them on a nomination basis would continue.

The marketing reform would help add 40 metric million standard cubic metres per day (mmscmd) of production to the existing output of 84 mmscmd, he said.

Crude oil futures decline on low demand

Source: Financial Express, Sept 27, 2020

The Road Transport and Highways Ministry has notified regulations for various alternative fuels to further promote sustainable transportation, Union Minister Nitin Gadkari said on Sunday.

“After testing use of H-CNG (18 per cent mix of hydrogen) as compared to neat CNG for emission reduction, the Bureau of Indian Standards has developed specifications of hydrogen-enriched compressed natural gas (H-CNG) for automotive purposes as a fuel,” the Road Transport, Highways and MSME Minister said in a tweet.

The notification for amendments to the Central Motor Vehicles Rules 1989, for the inclusion of H-CNG as an automotive fuel, has been published, the minister tweeted.

It is a step toward an alternative clean fuel for transportation, he added.

Crude import bill falls 61% to $17.7 billion in April-August

Source: Financial Express, Sept 22, 2020

Crude import bill in the first five months of the current financial year fell 60.7% annually to $17.7 billion, even though the volume of crude oil sourced from outside was only 22% lower than that in the same period a year ago. In rupee terms, cost of crude imported in the period was 57.5% lower year on year (YoY) to Rs 1.33 lakh crore. According to the government’s petroleum planning and analysis cell, 73.8 million tonnes (MT) of crude oil have been imported in the country in the April-August period this year.

The price of the Indian crude oil basket, which stood at an average of $64 a barrel in January, is currently trading around $42/barrel, after it had plunged to around $20 in April.

India imports close to 85% of its annual crude oil requirements, and the massive oil bill (it makes up for 21% of the country’s imports) is the biggest driver of the country’s trade deficit, and consequently current account deficit. Benefits of lower prices are seen to sustain going forward as Saudi Arabia, Iraq, UAE and Kuwait — which account for 54% of India’s crude imports — have recently reduced crude oil rates for October shipments. The country’s dependence on purchases from overseas has only risen in recent years, as domestic production falters in the absence of adequate incentives. However, crude oil imports are subdued this year because of the low demand of petroleum products amid the sporadic lockdowns to contain the spread of coronavirus. Consumption of diesel in August was 12% lower than July, while on a y-o-y basis, sales were down 20.7% to 4.9 MT in the month. While 15.2 MT of crude oil was imported in August —23% lower, annually — domestic crude production recorded a 6% annual fall to 2.6 MT in the month.

IOCL to set up Rs 17,825-crore petrochemical unit in Gujarat refinery

Source: Financial Express, Sept 22, 2020

State-run Indian Oil Corporation (IOCL) will invest Rs 17,825 crore in its Gujarat refinery to boost its capacity to produce petrochemicals, the company said on Monday. The development is in line with the IOCL’s strategy to facilitate petrochemical integration into its refinery expansion plans, as this group of products is touted to be the biggest driver of oil demand in the long term. The Gujarat refinery upgrade is expected to be completed in 42 months.

“The intention is to increase petrochemical intensity to insulate ourselves from the vagaries of auto fuel margin cracks and guarantee better refining margins,” IOCL chairman SM Vaidya said on Monday while addressing the media after the company’s 61st annual general meeting. IOCL net profit fell 47% annually to Rs 1,910.8 crore in the quarter ended June 30, mainly due to inventory losses stemming from fluctuations in global oil prices. The petrochemicals business is expected to act as a cushion to its low-margin refinery business.

Vaidya added that though the company was revising the long-term demand scenario after the coronavirus crisis, it was on track to spend the Rs 26,233-crore capex earmarked for FY21. The company’s board has also recently approved the implementation of an integrated para-xylene (PX) and purified terephthalic acid (PTA) complex project at its Paradip refinery in Odisha, which would require an estimated investment of Rs 13,805 crore. The project is expected to be completed by 2024. In the wake of a shift in energy usage patterns to address climate change and global warming, IOCL has been investing across the energy value chain in diverse areas such as renewables, electric mobility, bio-fuels and hydrogen. It has set up EV-charging and battery-swapping facilities in 76 and 11 retail outlets, respectively. The company also intends to set up a metal-air, battery-manufacturing facility and develop fuel cells and indigenous hydrogen storage solutions.

State-run oil and gas firms set to invest Rs 1.62 trillion this year

Source: Business Standard, Aug 26, 2020

New Delhi: State-run oil and gas firms are set to invest Rs 1.62 trillion in FY21 – including capital expenditure (capex) and operational expenditure (opex) — which is expected to generate employment of 240 million man-days.

At present, the sector is seeing work on 8,363 projects with an anticipated cost of Rs 5.88 trillion.

These expenditure figures, expected to give a fillip to the employment scenario, were lined up by the companies in a review meeting by Petroleum Minister Dharmendra Pradhan recently.

“The amount spent will create a virtuous cycle of investments and play a crucial rule in reviving the economy. It will also provide employment opportunities to people,” said the ministry. The major 25 ongoing projects have an anticipated cost of Rs 1.67 trillion and have incurred Rs 7,861 crore of capex, leading to generation of 7.65 million man-days so far.

Of the total anticipated cost of such projects, close to Rs 1.2 trillion is targeted to be incurred as capex through FY20-22. In FY21, Rs 26,576 crore of capex had already been incurred till August 15. An amount of Rs 3,258 crore was paid on account of labour during this period.

India’s June crude oil imports lowest in over 5 yrs; exports fall

Source: Business Standard, Aug 02, 2020

New Delhi: India’s crude oil imports fell in June to their lowest level since February 2015, while year-on-year refined product exports declined for the first time in almost a year, government data showed on Friday.

Crude oil imports last month dropped about 19% from a year earlier to 13.68 million tonnes, down for a third straight month, data from the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas showed.

“This is likely driven by not yet fully recovered oil demand and expectation that it might take longer to have Indian oil demand rising strongly again,” said UBS analyst Giovanni Staunovo.

“Together with higher crude imports at the start of the year, crude tanks are still well filled, reducing the need to import more crude for now.”

Fuel demand in India, the world’s third-biggest oil importer and consumer, fell 7.8% in June compared with a year earlier as surging coronavirus cases and rising retail prices hammered demand.

“India’s fuel demand recovery will continue to stall as coronavirus cases continue to skyrocket,” said OANDA senior market analyst Edward Moya.

India’s tally of Covid-19 cases jumped by a record 55,078 on Friday to 1.64 million in India.

Oil product exports fell about 6%, their first year-on-year fall since August 2019, primarily driven by declining diesel exports, which slid to their lowest since April last year.

Shipments of diesel also registered their first year-on-year decline since August last year, falling 5.7% to 2.09 million tonnes.

“To contain the rising inventories, some refineries are now planning to conduct maintenance and shutdowns in late third quarter of 2020, which will likely keep exports in check,” said Aaron Cheong, oil product analyst at consultancy Energy Aspects. The country’s top refiner, Indian Oil Corp, said it would continue to operate its refineries below capacity in 2020/21 as it expected local and overseas fuel demand to remain subdued.