LNG Terminals, Pipelines & Refineries in India Outlook Update Q1 2020

Crude Oil processing in refineries in February exceeded the target of 20.6 MMT and processed 21.6 MMT wherein IOCL processed the higher amount of crude oil of 5.7 MMT. Also, BPCL processing second highest crude oil of 3.5 MMT in February 2020

The increase in natural gas demand and limited gas reserve in India led to year on year increase of 6.8% in import of LNG in CY 2019. The global slump in spot price levels of LNG led to rise in LNG import to 8238 MMSCM in Q4 2019 by 17.6% from the levels of Q4 2018. Moreover, the levels is likely to rise in Q1 CY 2020 as India is set to import record volumes of liquefied natural gas in Q1 CY 2020, taking advantage of the fuel’s price hitting all-time lows due to the coronavirus outbreak dampening demand in China. With the rise in import levels, Dahej & Hazira LNG terminals are running at almost 100% capacity utilization rate. Moreover, Due to force majeure some of the cargoes bound for China is to be diverted to India. Consequently, this shall lead to the saving of USD 800 million in current fiscal deficit in Q1 CY 2020 which is crucial in the times of economic slowdown around the globe.

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Key Trends

• HPCL refining margins to fall by one-third during the current fiscal due to volatility in crude prices leading to inventory losses.
• India's oil import bill is expected to fall by a sharper 10% in Q1 2020 as the increasing spread of Coronavirus and now the fallout of talks between OPEC and Russia has depressed the crude oil prices to about USD 30 a barrel now against a high of over USD 70 a barrel in September, 2019
• India set to become world's No.2 oil importer surpassing China by mid-2020

Key Investments

• GAIL India Ltd, the country largest gas utility, will invest Rs 1.05 lakh crore over the next five years to expand pipelines, lay city gas distribution network and raise petrochemical production capacity with CAPEX of INR 45,000 to INR 50,000 crore in laying pipelines
• India is investing USD 60 billion to build a national gas grid and import terminals by 2024 in a bid to cut its carbon emissions
• Indian Oil Corp will spend INR 26,233 crore with the bulk of it in expansion and upgrade of its seven refineries across India.

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