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.

India eyes access to American crude-oil storage facility

Source: The Hindu Business Line, Jul 22, 2020

New Delhi: India finally seems to be getting its act together for ensuring energy security by focussing on crude-oil storage capacities not only in the country but also acquiring access to capacities overseas including in the US.

“To make the most of the low crude-oil prices, India has initiated talks with the US to gain access to oil storage facilities in that country,” said a senior official, adding that this was also discussed at the recently held second ministerial meeting of the US-India Strategic Energy Partnership (SEP), which covered the entire gamut of bilateral energy issues.

In fact, after the meeting, Minister for Petroleum and Natural Gas and Steel Dharmendra Pradhan had said that the two sides have signed a Memorandum of Understanding to begin cooperation on operation and maintenance of strategic petroleum reserves, including exchange of information and best-practices.

They also discussed the possibility of India storing oil in the US Strategic Petroleum Reserve to increase their nation’s strategic oil stockpile. A Petroleum Ministry official in the know told BusinessLine that preliminary meetings have happened for accessing the facility in the US but talks are going to be held to work out the nuances, in the coming days.

This is mainly for the American oil which India will buy, the official said, adding that once the access is there, India, depending on the need, can either bring the oil home or sell it there itself. Modalities on capacity available and pricing will be worked out when the talks reach the final stages.

‘Leveraging expertise’

As regards to the MoU between the US Department of Energy and the Indian Ministry of Petroleum and Natural Gas concerning cooperation on strategic petroleum reserves, the official said: “We are at a nascent stage as far as strategic reserves are concerned. The US has been operating them for years, so we wanted to leverage their experience and expertise. Besides, in our country, even if we start work at phase-II of building capacities, it will take at least six years to complete. So, the opportunity of getting cheap crude should not be let go.”

Meanwhile, India Strategic Petroleum Reserves Ltd (ISPRL) has successfully filled the current capacities available in India. The capacities were filled by the national oil companies. The bilateral hydrocarbons trade between India and the US alone touched $9.2 billion during 2019-20, accounting for 10 per cent of the overall bilateral trade. In fact, India is now the fourth-largest export destination for US crude and the fifth-largest for US LNG. The trend is expected to continue with Indian companies entering into more long-term contracts from this year.

India-Bangladesh form LPG joint venture

Source: The Economic Times, Jun 30, 2020

NEW DELHI: New Delhi: Indian Oil Corp has agreed to form an equal joint venture with Bangladesh’s Beximco LPG to set up a terminal to import liquefied petroleum gas in Bangladesh.

Indian Oil’s Dubai unit IOC Middle East FZE and Beximco’s holding company RR Holdings Ltd, Ras Al Khaimah, UAE have signed an agreement for LPG business in Bangladesh, as per a statement by Indian Oil.

The joint venture would begin with acquiring Beximco’s existing LPG assets in Bangladesh. “We intend to set up a large LPG terminal at a deep-water port in Bangladesh, which would facilitate receipt of LPG in Very Large Gas Carriers, leading to reduction in cost of imports. Reduction in cost of import would help make LPG available at an affordable price to the people of Bangladesh,” said Sanjiv Singh, Chairman, Indian Oil.

The JV also intends to diversify into other downstream oil and gas businesses such as lube blending plant, LNG, petrochemicals, LPG export to north east India through pipeline between two nations and renewable energy, the statement said.