India is forming a group bringing together state and private refiners to seek better crude import deals
Private oil refiners are willing to work with state-run peers to bargain collectively for better oil import deals, oil minister Hardeep Singh Puri said on Friday, as the nation looks to cut its import bill.
India is forming a group bringing together state and private refiners to seek better crude import deals, Reuters reported on Monday.
“The outcome of the meeting between private and state-run (refiners on a joint oil procurement plan) was very encouraging,” Puri said in a news conference at the India Energy Forum industry event.
He said the private companies are “enthused” by the plan.
India is the world’s third-largest oil importer and consumer, reliant on imports for about 85 per cent of its crude and buying most of that from Middle East producers.
Private companies including Reliance Industries, operator of the world’s biggest refining complex, and Nayara Energy, partly owned by Russian oil major Rosneft, control about 40 per cent of India’s 5 million barrel per day (bpd) refining capacity.
With local gasoline and gasoil prices rising to record highs in India’s worst power crisis for years, the nation wants to redouble efforts to buy wisely.
The country’s trade deficit last month surged to a record $22.6 billion, its highest in at least 14 years, driven by expensive imports.
India has repeatedly asked the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, to boost output to bring down global oil prices.
“Cost of energy should not be allowed to outstrip paying capacity of consumers and this imperative needs to be configured by the consuming countries in planning their production profile for the future,” Puri said.
The FDI limit in PSU-promoted oil refineries will continue at 49 per cent
The government on Thursday permitted 100 per cent foreign investment under the automatic route in oil and gas PSUs which have received in-principle approval for strategic disinvestment. The move would facilitate privatisation of India’s second-biggest oil refiner Bharat Petroleum Corp Ltd (BPCL). The government is privatising BPCL and selling its entire 52.98 per cent stake in the company. According to a press note of the Department for Promotion of Industry and Internal Trade (DPIIT), a new clause has been added to the FDI policy for oil and natural gas sector.
“Foreign investment up to 100 per cent under the automatic route is allowed in case an ”in-principle” approval for strategic disinvestment of a PSU has been granted by the government,” it said. The decision regarding this was taken by the Union Cabinet last week.
Two out of the three companies that have put in an initial expression of interest (EoI) for buying out the government’s entire 52.98 per cent stake in BPCL are foreign entities. The FDI limit in PSU-promoted oil refineries will continue at 49 per cent — a limit that was set in March 2008.
As of now, the government is selling the stake in only BPCL. Indian Oil Corporation (IOC), the nation’s largest, is the only other oil refining and marketing company under direct government control. Hindustan Petroleum Corporation Ltd (HPCL) is now a subsidiary of state-owned Oil and Natural Gas Corporation (ONGC).
The government had in March 2008 raised the FDI limit in oil refineries promoted by public sector companies from 26 per cent to 49 per cent. The firm acquiring the government’s 52.98 per cent stake in BPCL will also have to make an open offer to buy an additional 26 per cent stake from other stakeholders at the same price, as per the takeover rules.
Mining-to-oil conglomerate Vedanta and US-based private equity firms Apollo Global and I Squared Capital’s arm Think Gas are in the race to buy the government’s stake in BPCL.
Indian Oil plans to build a green hydrogen plant at its 160,000 bpd Mathura refinery
Indian Oil Corp will seek to cut emissions by using clean electricity from the grid to fuel its capacity expansion, instead of building its own power plants, the country’s top refiner said on Friday.
IOC, which controls about a third of India’s 5 million barrels per day (bpd) of refining capacity, aims to raise its capacity by about 500,000 bpd by 2023-24.
“We have got several expansion plans down the line which are already approved. We will not have a captive power plant and will utilise power from the grid, preferably green power. This will help decarbonise some part of the manufacturing,” it said.
IOC also plans to build a green hydrogen plant at its 160,000 bpd Mathura refinery in northern Uttar Pradesh state.
“IndianOil has a wind power project in Rajasthan. We intend to wheel that power to our Mathura refinery to produce absolutely green hydrogen through electrolysis,” S.M. Vaidya, chairman of IOC said in the statement.
Green hydrogen, derived from water electrolysis using renewable energy such as solar or wind, will replace carbon-emitting fuels used in the refinery to process crude oil into value-added products, such as petrol and diesel, IOC said.
In addition to strengthening its refining, fuel retailing and petrochemicals business, IOC will focus on hydrogen and electric mobility over the next 10 years, Vaidya said.
The refiners operated at an average rate of 89.59 per cent of capacity in June
The country’s refiners’ crude throughput in June was little changed from the previous month when it fell to multi-month lows as a severe second wave of coronavirus restrained demand, forcing refiners to reduce runs.
Refiners processed 4.50 million barrels per day (18.4 million tonnes) of crude oil in June, provisional government data showed on Friday. This compares with 4.49 million barrels per day (bpd) processed in May, which was the lowest since October 2020.
Crude oil imports also fell to a nine-month low in June as refiners curtailed purchases amid higher fuel inventories due to low consumption and renewed lockdowns in the previous two months, data obtained from trade sources showed.
Refineries’ crude oil throughput last month was still 4.7 per cent higher than June 2020 levels. India’s fuel demand also inched higher after slumping to a nine-month low in May as many states in the world’s third-biggest oil importer and consumer started easing restrictions and mobility picked up.
The state fuel retailers’ gasoline sales also exceeded pre-pandemic levels in the first fortnight of July, preliminary industry data showed last week.
“With a further likely easing of mobility restrictions, I would expect oil demand to recover further, resulting in higher refinery processing rates down the road,” UBS analyst Giovanni Staunovo said.
The refiners operated at an average rate of 89.59 per cent of capacity in June, down from 92.37 per cent of capacity in May, the government data showed.
The country’s largest refiner, Indian Oil Corp (IOC), last month operated its directly owned plants at 93.53 per cent capacity, as per the data. Reliance, owner of the world’s biggest refining complex, operated its plants at 93.12 per cent capacity in June.
Natural gas output rose 19.5 per cent to 2.78 billion cubic metres, while crude oil production eased nearly two per cent to 606,000 barrels per day (2.48 million tonnes), data from the Ministry of Petroleum and Natural Gas showed.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Oil slumped $5 a barrel on Monday, closing out its worst day since March, after an OPEC+ agreement to boost output stoked fears of a surplus just as rising COVID-19 infections once again threaten demand.
Crude oil’s year-long recovery has stalled out over the last two weeks due to the prospect of new supply undermining the case for higher prices. With the Delta variant of the coronavirus spreading worldwide – fuelling a 70% rise in US infections last week – funds bailed out of long positions on Monday across multiple risk asset groups, including stocks and the dollar.
It is still unclear how the variant will affect oil demand. Consumption in the United States, the world’s largest consumer of fuel, has steadily strengthened in recent weeks, but India, the third-biggest importer, has cut back imports due to oversupply and fears of reduced demand.
“The market is very fixated on the potential for the Delta variant exploding,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Because of that, we’re getting a run on the bank.”
Brent crude settled at $68.62 a barrel, losing $4.97, or 6.8 per cent. US oil futures for August delivery, which expires on Tuesday, settled at $66.42, down $5.39, or 7.5 per cent. The September US crude oil futures contract settled at $66.35, down $5.21.
The Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, reached a compromise on Sunday to increase oil supply from August to cool prices, which had hit their highest level this month in more than two years.
“We still face a significant deficit in terms of supply versus demand, but for now, the additional barrels are seen as enough to deflate and kill the recent rally,” said John Kilduff, a partner at Again Capital in New York.
Given heavier trade volumes – with Brent futures trading 167% of the last session – it appeared funds were selling off, Kilduff said. “It absolutely has the look of a speculative liquidation here.”
Some major banks have argued the market will continue to rally, with Goldman Sachs reiterating on Monday that it sees more upside. It said the OPEC agreement was in line with its view that producers “should focus on maintaining a tight physical market all the while guiding for higher future capacity and disincentivising competing investments.”
However, the OPEC deal removes more of the supply curbs that have been a cornerstone of the market for a year. At present, OPEC+ is keeping about 5.8 million crude barrels per day out of the market, a figure that will drop by 2 million bpd by year-end.
“Longer term, free and additional production capacities from OPEC+ countries are the key reason why we see oil moving lower again,” said Julius Baer analyst Carsten Menke.
A popular spread trade in the oil market – between the first two December futures contracts, December 2021 and December 2022 – narrowed to the smallest since June 1. A narrowing spread indicates that traders expect supplies to rise by the end of 2021.
OPEC+ is moving towards adding about 2 million barrels per day (bpd) of oil this year
Oil prices rose more than one per cent on Thursday on the prospect of growing global crude oil demand and a Reuters report that OPEC+ producers could increase output in the coming months more slowly than expected. Brent crude was up 92 cents, or 1.2 per cent, to $75.54 a barrel by 11:17 a.m. EDT (1517 GMT). U.S. West Texas Intermediate crude gained $1.36, or 1.9 per cent, at $74.83.
Both benchmarks rose more than $2 a barrel earlier in the session. At its meeting on Thursday, OPEC+ members leaned toward adding about 2 million barrels per day (bpd) of oil to the market between August and December, an OPEC+ source told Reuters.
The source said that monthly output increases by the group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, would amount to less than 0.5 million bpd.
Rystad Energy analyst Louise Dickson said the market could easily absorb the mooted output increase. “If OPEC+ does keep a conservative stance and increases its production in a cautious manner – and up to 500,000 bpd is definitely cautious – prices will be supported,” she said.
A drop in crude inventories at Cushing, Oklahoma, the delivery point for WTI, to their lowest since March 2020 also underpinned the U.S. benchmark.
Remarks by an OPEC+ panel earlier in the week that crude demand was expected to grow by 6 million bpd in 2021 sent oil prices to fresh multi-year highs, but some market participants remained sceptical of the projection.
“Everybody is drinking the OPEC Kool-Aid here and buying the story that demand is going to increase by 5 million barrels in the second half of the year, and if that’s not somebody talking their position, I don’t know what is,” said Bob Yawger, director of energy futures, at Mizuho Securities.
While he expects some type of uptick, Yawger said OPEC’s demand forecast doesn’t account for the possibility of increased supply from Iran, the spread of the COVID-19 Delta variant hitting demand and lacklustre seasonal U.S. gasoline use.
Outbreaks of the Delta variant of the coronavirus are raising concerns that the demand recovery could falter. Renewed lockdowns and rising costs weakened momentum in Asia’s factory activity in June.
Financial markets will be looking for cues on the fate of Reliance Industries Ltd.’s planned $15 billion deal with Saudi Arabian Oil Co., or Aramco, when Chairman Mukesh Ambani takes the stage to address shareholders Thursday.
India’s most valuable company may also apprise investors of developments including its 5G rollout plan, possible listing of its digital unit and a cheaper smartphone being developed with Google. There’s also interest among investors to know about his succession road map, including the role his three children will play at the helm of the conglomerate in the future.
For the second year in a row, the annual event will be held virtually as the country faces the world’s fastest-growing Covid-19 outbreak and local authorities retain curbs on mass congregations.
Reliance’s shareholder meets — one of the rare occasions when Ambani, Asia’s richest person, speaks publicly — have become a platform for the refining-to-retail conglomerate to announce deals, new products and massive investment initiatives. From being held in football stadiums in the 1980s under Ambani’s father to virtual meetings now, the transition is symbolic of Reliance’s own journey as it morphs from being an energy giant to a technology titan.
Aramco deal: Ambani first announced at the 2019 shareholder meeting that Aramco would buy a 20% stake in Reliance for about $15 billion. Last year, he confirmed that the transaction hadn’t progressed as planned as speculation swirled on whether it’s happening or falling apart.
A local media report this month said Aramco’s chairman may join Reliance board on June 24
O2C investors: Ambani has spoken of the possibility of other investors coming in Reliance’s oil-to-chemicals business after it was hived off earlier this year. These details as well as a road map for this unit in a world pivoting toward a green and low-carbon future will be keenly watched.
Google phone: Investors may get the first glimpse of Reliance and Google’s co-branded affordable mobile phone that was announced last year as part of a $4.5 billion investment by Google in Reliance’s digital unit. Pricing will be key.
The vision of selling hundreds of millions of devices in the early years after the launch is now said to be facing supply-chain snags and rising component prices
5G: Reliance Jio Infocomm Ltd., is gearing to start 5G networks in India, as early as this year. Advance tests have been underway since January and investors will await details of the roll out plan. Reliance is known to undercut rivals on price, so its plans will be critical for the market. Any word on listing Jio will be a major development.
E-commerce: Ambani has made bold bets on India’s e-commerce sector. He wants to enlist the support of local mom-and-pop stores and leverage Reliance’s retail and telecom networks — a vision that has lured in more than $26 billion investment from global giants.
Covid-19 drug: Reliance said this month that it was developing a new Covid-19 drug and cheaper testing kits. It’s exploring the use of a tapeworm drug, Niclosamide, as a possible cure for the viral illness. Given the size of the Covid outbreak in India, any pharmaceutical breakthrough would have major impact.
Shares of Reliance have advanced 11% this year compared to almost 10% rise in the benchmark S&P BSE Sensex.
Reliance has 25 buy, 8 hold and 4 sell ratings from brokerages, according to data compiled by Bloomberg
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
The failure of the Keystone XL project demonstrated the challenges of building new pipelines in the U.S. and Canada amid galvanized environmental groups and delivered a blow to oil-and-gas companies that now must rely on aging infrastructure.
abandoned Wednesday, and other pipelines for more than a decade, hoping to choke off fossil-fuel usage by making it harder to transport. The success with Keystone XL already has emboldened environmentalists, who in recent weeks have turned their attention to other pipelines in the U.S. and Canada.
But the U.S. and Canada still rely on pipelines to transport fossil fuels that underpin commerce, transportation and heating and cooling. As pipelines become increasingly difficult to build, the countries will become more dependent on older infrastructure that is vulnerable to disruptions. The shutdown of the Colonial Pipeline last month after it was attacked by hackers highlights the potential impact caused by unexpected disruptions to the current network.
“Clearly, we’re relying on the infrastructure we currently have. The question becomes, as we think about filling future demand, and we need to repair or replace old infrastructure, how are we going to handle it?” said
Amy Myers Jaffe,
a research professor at Tufts University’s Fletcher School.
Global oil demand is projected to peak in coming years, which could mean projects like Keystone could eventually outlive their utility, Ms. Jaffe said. “We’re not building for the 1950s, we’re building for the 2030s.”
In the past two years, at least four multibillion-dollar pipeline projects that drew protests have been canceled or delayed after encountering regulatory and political roadblocks, and environmental groups are looking to capitalize on the momentum. Some producers also have resorted to transporting oil by rail, a more expensive and potentially more dangerous alternative.
evacuated 44 workers in Minnesota, working on replacing a crude-oil pipeline there, after a group of protesters descended on a pump station in the middle of the state. Native American tribes and environmental groups continue to challenge the Dakota Access Pipeline in a long-running effort that has entangled the company in court for years.
The death of Keystone XL is the latest setback for the oil-and-gas industry. In May, a Dutch court found that
board, a historic defeat for the oil giant that may force it to alter its fossil-fuel-focused strategy.
The trio of defeats demonstrates how dramatically the landscape is shifting for oil-and-gas companies as campaigns directed by environmentalists have spread to investors, lenders, politicians and regulators who are increasingly calling for a transition to cleaner forms of energy.
Cos. dropped its Constitution natural gas pipeline after failing to gain a water permit from New York state.
who made canceling Keystone XL a central plank of his election campaign, has remained mostly mum about other pipeline projects under construction.
Environmental and indigenous groups have sued to stop construction on Enbridge’s project to replace its Line 3 crude-oil pipeline with a larger conduit that will carry oil from Alberta’s oil sands to Superior, Wis., arguing that the U.S. Army Corps of Engineers failed to consider the environmental impacts of the pipeline when it granted a water-quality permit.
The company already has replaced sections in other states but has encountered obstacles in Minnesota, where it hopes to complete construction by the end of the year. After Enbridge evacuated workers Monday, the Hubbard County Sheriff’s department arrested 179 people for damaging equipment and dumping garbage on the site.
“The project is already providing significant economic benefits for counties, small businesses, Native American communities, and union members—including creating 5,200 family-sustaining construction jobs, and millions of dollars in local spending and tax revenues,” said the company in a statement on Thursday.
The Minnesota Court of Appeals is expected to make a ruling on a case that challenged the state’s Public Utilities Commission’s approval of the project.
Michigan state officials in November revoked a permit that allowed another Enbridge pipeline to run along the bottom of the Straits of Mackinac, citing the risk of damage to the region’s ecosystem. Gov.
gave Enbridge a May 12 deadline to shut down the pipeline, but the company hasn’t complied, claiming the governor lacks the authority to do so.
The 645-mile conduit carries more than half a million barrels of oil and natural-gas liquids each day from Superior to refineries in Michigan, Ohio, Pennsylvania, Ontario and Quebec.
“Does the Keystone XL cancellation embolden fights against other pipelines? That’s a resounding yes,” said
Great Lakes region executive director for the National Wildlife Federation, which opposes the operation of Enbridge’s pipeline through Michigan.
“We’re very pleased,” said
executive director of the Sierra Club, which opposes both Enbridge pipelines in Minnesota and Michigan. He said the successful Keystone XL effort has taught them important lessons on how to oppose other projects. “It has taught us to never give up,” he said.
Enbridge pointed to the dramatic impact of the Colonial Pipeline’s six-day closure last month as an example of the consequences of scuttling energy infrastructure. The shutdown of the nation’s largest fuel pipeline, caused by a May 7 ransomware attack, spurred a run on gasoline across the Southeast, leaving thousands of gas stations without fuel for days.
During a Senate committee testimony Tuesday, Colonial Chief Executive
emphasized the scale of the pipeline, noting 50 million Americans rely on it to carry fuel to gas stations, as it provides almost half of the fuel consumed on the East Coast.
“Not only do everyday Americans rely on our pipeline operations to get fuel at the pump, but so do cities and local governments, to whom we supply fuel for critical operations, such as airports, ambulances and first responders,” Mr. Blount said in written testimony.
IOC’s refineries were operating at about 95 per cent of their capacity in late April.
The top state oil refiners are reducing processing runs and crude imports as the surging COVID-19 pandemic has cut fuel consumption, leading to higher product stockpiles at the plants, company officials told Reuters on Tuesday. Indian Oil Corp, the country’s biggest refiner, has reduced runs to an average of between 85 per cent and 88 per cent of processing capacity, a company official said, adding runs could be cut further as its plants at Gujarat, Mathura and Panipat are facing problems storing bitumen and sulphur.
IOC’s refineries were operating at about 95 per cent of their capacity in late April. “We do not anticipate that our crude processing would be reduced to last year’s level of 65 per cent-70 per cent as inter-state vehicle movement is still there … (the) economy is functioning,” he said.
Several states across India are under lockdown as the coronavirus crisis showed scant sign of easing on Tuesday, with a seven-day average of new cases at a record high, although the government of India, the world’s third-largest oil importer, and consumer, has not implemented a full lockdown.
State-run Bharat Petroleum Corp has cut its crude imports by 1 million barrels in May and will reduce purchases by 2 million barrels in June, a company official said. M.K. Surana, chairman of Hindustan Petroleum Corp, expects India’s fuel consumption in May to fall by five per cent from April as the impact on driving and industrial production is not as severe as last year.
“This time it is not a full lockdown like last time,” he said. “Sales in April was about 90 per cent of March and we expect May could be about five per cent lower than April.” HPCL has no immediate plan to cut crude runs, he said, although the company has shut some units at its 150,000 bpd Mumbai refinery for maintenance and upgrade.
State-run Mangalore Refinery and Petrochemicals Ltd’s is already operating its 300,000 bpd complex at lower rates because of maintenance at a 60,000 bpd crude unit and some secondary units, a company official said.
“The crude and other units will start operations from the end of this month, we will decide on the future course after seeing local demand,” he said. To ease storage problems, India could export some diesel, which constitute 40 per cent of local refiners output, another BPCL official said. No immediate response was available from the companies.
India’s total gasoline sales came to nearly 747,000 bpd in March.
Indian Oil Corp Ltd’s (IOC) refineries are operating at about 95 per cent of their capacity, down from 100 per cent at the same time last month, two sources familiar with the matter told Reuters. Coronavirus cases have surged in India, leading to curbs on movement across the country, a move analysts say could hit fuel demand in the world’s third-largest oil importer and consumer. An official at IOC, India’s biggest oil refiner, said the cuts in runs at its refineries were “marginal” but analysts and industry officials say there could deeper reductions in output from the country’s refineries in coming days.”
If cases continue to rise and curbs continue or intensify for a longer period, we may see cuts in refinery runs and lower demand after a month,” an industry source said. Consultancy FGE said it estimates gasoline demand will drop by 100,000 barrels per day (bpd) in April and by more than 170,000 bpd in May if further restrictions are imposed
India’s total gasoline sales came to nearly 747,000 bpd in March. Diesel demand is expected to contract by 220,000 bpd in April and by another 400,000 bpd in May, according to FGE. India’s diesel consumption, a key indicator linked to economic growth and which accounts for about 40 per cent of overall refined fuel sales in India, was 1.75 million bpd in April. While curbs to restrict movement are in place in many parts of India, it has not imposed a total shutdown as it did in March last year
Most businesses are still operating normally. Gasoline and diesel sales by India’s state fuel retailers in the first 21 days of April were higher than in 2020, industry data showed, mainly because of lower demand last year during the complete lockdown. Diesel demand was lower compared with the same period of 2019, while gasoline demand was up two per cent, the data showed.
FGE said it had cut its liquefied petroleum gas (LPG) consumption estimates for April and May marginally, with the delivery of LPG cylinders to households likely to be hit in the coming weeks with more lockdown announcements and travel curbs. LPG sales by India’s state retailers in the first three weeks of April fell 1.9 per cent to 1.5 mln tonnes, the data showed