Indian Refiners Deepen Cuts To Saudi Oil Purchases in May

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NEWSLETTER, 6thAPRIL’2021

OIL MARKET NEWS (INDIA)

1. Indian refiners deepen cuts to Saudi oil purchases in May


 Indian state refiners will buy 36% less oil from Saudi Arabia in May than normal, in
a sign of escalating tensions with Riyadh even after the Kingdom supported the idea
of boosting output from OPEC and allied producers last week.
 State-run refiners have placed orders to buy 9.5 million barrels of Saudi oil in May,
compared with the previously planned 10.8 million barrels.
 The refiners - Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp
and Mangalore Refinery and Petrochemicals Ltd - normally buy 14.8 million barrels of
Saudi oil in a month.
 Saudi Aramco, the state oil company of the Kingdom, raised official selling price, or
OSP, of its oil for Asia while cutting it for Europe and American markets.

2. Indian Oil Corp buys its first Johan Sverdrup crude cargoes
 State-run refiner Indian Oil Corporation has made its first purchase of Norway's Johan
Sverdrup crude, buying 4 million barrels via a tender as it speeds up diversification
of crude imports.
 IOC will take delivery of two million barrels of the North Sea crude in each of May
and June.
 Oil from Johan Sverdrup, the largest North Sea discovery in more than three decades,
started to flow to Asia's top oil importers in late 2019, with India's Reliance
Industries Ltd among its first takers.
 India last discharged a 1-million-barrel cargo of Johan Sverdrup crude in September
2020.
 Chinese refiners have slowed crude purchases in the spot market amid seasonal refinery
maintenance and a large influx of Iranian oil, pressuring global oil sellers.
 Indian refiners, meanwhile, are looking at crude from the United States, West Africa,
South America and the Mediterranean as alternative options as they diversify away
from Middle Eastern oil.
 Last month, HPCL-Mittal Energy loaded India's first cargo of Guyana's Liza light sweet
crude.
 Another state refiner, BPCL, bought three million barrels of U.S. light sweet grades,
including West Texas Intermediate Midland and Eagle Ford, for arrival in May.

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LPG-LNG MARKET NEWS (INDIA)

1. Flagship India LNG project commissioning in April

 India’s first floating storage and regasification unit-based liquefied natural gas
import project is finally closing in on start-up with the unit destined for H-Energy’s
Jaigarh scheme en route from Keppel Shipyard in Singapore.
 The vessel departed Singapore last Thursday and is expected to arrive within the week
at Jaigarh in Maharashtra on India’s west coast with commissioning to be performed in
April, according to H-Energy.
 Hoegh Giant will be the first FSRU operating in India and will deliver natural gas to
the 57-kilometre Jaigarh-Dabhol pipeline connecting the LNG import terminal to the
national gas grid.
 H-Energy has chartered the FSRU for a 10-year contract that has annual termination
options after year five.
 The 2017-built Hoegh Giant has storage capacity of 170,000 cubic metres and peak
regasification capacity of 750 million cubic feet per day (equivalent to about 6
mtpa).
 A roadmap with H-Energy also includes the joint development of the downstream small-
scale LNG market in the region, using the FSRU as the terminal for storage and
reloading to smaller vessels.
 H-Energy’s Jaigarh LNG import project is to be implemented in two phases. Phase one
consists of the 5 mtpa jetty-based FSRU, while the second phase envisages an onshore
terminal with an ultimate capacity of 8 mtpa.

2. Reliance-BP seek buyers for 5.5 mmscmd gas from KG-D6

 Reliance Industries and its partner BP Plc of UK have sought bids for sale of 5.5
million standard cubic meters per day of additional natural gas that will be available
for sale from their eastern offshore KG-D6 block.
 The e-auction is slated for April 23 and the gas supply will start from late April or
early May.
 Bidders will have to quote a price linked to Platts JKM (Japan Korea marker), the
liquefied natural gas (LNG) benchmark price assessment for spot physical cargoes.
 The lowest bid that can be placed is JKM minus USD 0.3 per million British thermal
units.
 The highest acceptable bid would be JKM plus USD 2.01 per mmBtu. This is the same
benchmark the RIL-BP had used in February to sell out 7.5 mmscmd of gas from the
block.
 At current price, the lowest price for the 5.5 mmscmd of gas that RIL-BP are auctioning
comes to near USD 6.5 per mmBtu.
 But they will be entitled to a maximum of USD 3.62 per mmBtu ceiling fixed by the
government for a six-month period to September 30.
 The consortium of RIL and BP Exploration (Alpha) Limited (a unit of BP Plc) is
developing deepwater gas fields viz. the R Cluster (D34), MJ (D55) and Satellites &
Other Satellites (D2, D22, D29 and D30) in the KG D6 block.
 The April auction would be the third time RIL-BP conducted an e-bidding process which
ran on a dynamic forward auction basis for sale of KG-D6 gas.
 In November 2019, 5 mmscmd of natural gas was sold at price in the range of around
8.6 per cent of Brent crude oil for tenure ranging from 2 to 6 years.

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OIL MARKET NEWS (ROW)

1. Malaysia, Brunei agree to jointly develop two offshore oil fields

 Malaysia’s state oil company Petronas signed an agreement with Brunei to jointly
develop two offshore oilfields.
 The Gumusut-Kakap and Geronggong-Jagus East fields straddle the two countries’
maritime boundary.
 The tiny sultanate of Brunei is surrounded by the Malaysian state of Sarawak on the
north coast of the island of Borneo.
 Petronas believes that both parties can look forward to continuing the strong momentum
towards developing the nations’ energy sectors for the long-term growth and prosperity
of both Brunei and Malaysia.
 Malaysian Prime Minister Muhyiddin Yassin and Brunei Sultan Hassanal Bolkiah issued
a separate joint statement, expressing hopes for more cooperation, including for the
development of gas resources.

2. Qatar Petroleum teams up with Shell in deepwater blocks off Namibia

 State-owned Qatar Petroleum has entered into an agreement with oil major Shell to
become a partner in two exploration blocks offshore the Republic of Namibia.
 Under the terms of the agreement, which is subject to customary approvals, Qatar
Petroleum will hold a 45 per cent participating interest in the PEL 39 exploration
license pertaining to Block 2913A and Block 2914B.
 The PEL 39 blocks are located offshore Namibia in ultra-deep-water depths of about
2,500 metres, covering an area of approximately 12,300 square kilometres.
 Shell will hold a 45 interest as the operator while the National Petroleum Corporation
of Namibia (NAMCOR) will hold the remaining 10 per cent interest.
 This is Qatar Petroleum’s second exploration license in Namibia. In August 2019, Qatar
Petroleum entered into agreements with Total for participating in blocks 2913B and
2912 offshore Namibia.

LPG-LNG MARKET NEWS (ROW)

1. Novatek plans to put up 60% in Arctic LNG 2 as collateral for financing


 Russian largest liquefied natural gas producer Novatek said it plans to put up its
60% stake in Arctic LNG 2 project as collateral for long-term financing of the
project.
 Novatek seeks to raise $11 billion in external financing and has said it planned to
get the funds by the first half of this year.
 The $21 billion project, which received final investment approval in 2019, is expected
to be launched in 2023 and to reach its full capacity of almost 20 million tonnes per
year in 2026.
 The project's equity partners include France's Total, China National Petroleum Corp,
China's CNOOC and the Japan Arctic LNG consortium made up of Mitsui & Co and state-
owned JOGMEC, formally known as Japan Oil, Gas and Metals National Corp.
 Russia's Sberbank SBER.MM said in January it had approved financing of up to $3.5
billion for the Arctic LNG 2.

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2. U.S. LNG export bonanza reshapes energy map in Asia

 U.S. exports of liquefied natural gas (LNG) to China, Japan and South Korea, the
biggest importers of the fuel, have surged to record highs in recent months as the
heavily industrialized region recovers from the COVID-19 pandemic.
 Such is the speed of growth of imports into Japan, the U.S. is running neck and neck
this year with Qatar - a long-term key exporter to Japanese utilities - as a major
supplier to the world’s third-largest economy.
 This comes despite U.S. LNG being nearly 40% more expensive than Qatar gas on a per
heating unit basis.
 LNG shipments from the U.S. to Japan, China and South Korea totaled 3.2 million tonnes
in February, almost two and a half times the highest monthly levels before the recent
surge.
 While March shipments of U.S. LNG into Asia have tailed off due to warmer weather
they are still well above typical levels for the month.
 The export bonanza being experienced by the U.S. caps the completion of the first
generation of export terminals that the shale gas revolution allowed.
 But the next round of projects being developed will face tough competition from Qatar,
which has announced plans for a massive expansion of export capacity and is enticing
buyers with sweet deals.
 A recent 2 million tonne annual supply deal with China’s Sinopec was priced at 10.19%
of prevailing Brent crude prices, one of the lowest levels on record.

Thanks + Best regards

(Tanker Desk) | E:TANKER@SAIGALSEATRADE.COM

SUSHMIT BISWAS DESK: +91 22 24231701 | MOB: +91 9830177518 | ICE: SBISWAS
AVANI BHATNAGAR DESK: +91 22 24231708 | MOB: +91 9057276821 | ICE: ABHATNAGAR
[*SOURCES: Reuters, Bloomberg, ET Energyworld, offshore-energy.biz]

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