Gas production to rise

India is expected to complete expansion of 2.5 million tonne per annum capacity at Dahej Liquefied Natural Gas receiving terminal this year on anticipation of a demand pickup from the fertilizer industries and city gas consumers.

“In 2020, additional regasification capacity is vital for India to fully benefit from the low spot LNG prices,” said Prakash Sharma, Asia Pacific Head of Markets and Transitions.

The commissioning of two new terminals, Mundra and Jaigarh, slipped into 2020. The other main addition to capacity will be the expansion of Dahej by 2.5 mmtpa, which should be completed during 2020,” he said in the 2020 Energy Outlook for India.

LNG demand grew 2% year-on-year through 2019 largely due to a slowdown in Q1 2019. Overall, RLNG usage was driven by the fertiliser (+9%) and city gas (+7%) sectors, which offset decreased consumption in the industrial sector (-8%).

Total gas demand growth should rebound in 2020, supported by the fertiliser and city gas sectors, he added in India’s 2020 energy outlook released 23 Jan 2020.

2019 was a disappointing year as oil and gas production declined, according to WoodMac’s Principal analyst Alay Patel.

Major reforms were introduced for licensing, but these failed to translate into successful bid rounds.

Gas production is set to rise by 9%, underpinned by deepwater projects operated by Reliance (KG-D6) and ONGC (KG-DW-98/2). “Both projects are on track for a 2020 start-up – although we expect only one well to be onstream in ONGC’s field.”

The Indian oil product demand is expected to grow by about 220,000 barrels per day. Almost 80% of this growth is expected to come from diesel, gasoline and LPG, according to WoodMac Research director Sushant Gupta.

“Stabilising economic growth, the impact of the government’s recent stimulus package and assuming a normal monsoon season, we expect a turnaround in diesel demand growth by about 4% to 1.83 million barrels per day for this year,” he said.

Gasoline will maintain its positive growth, up 8% to 806,000 b/d in 2020 as consumers continue to shift away from diesel passenger vehicles.

However, a higher oil price and uncertainty in global economic growth remain key downside risks, he pointed out.

Elaborating, Gupta felt that the IMO 2020 regulation will generally be beneficial for Indian refining margins.

“We expect middle-distillate cracks (price versus crude) to increase, benefiting Indian refiners because of the high yields of middle-distillate production in their product slate.”

But refiners will have to face headwinds from weak high-sulphur fuel oil and gasoline cracks. Supported by growing domestic demand and relatively higher refining margins in 2020, Indian refiners will be able to maintain high utilisation rates averaging close to 103%, believes Gupta.

Solar analyst Rishab Shrestha sees India investment in renewable sources of power continuing with a focus on affordability, security and environment.

Despite the ‘must run’ status of renewable power, wind and solar projects still faced large-scale grid curtailment in 2019, owing to the ongoing financial distress of state distribution companies. This has affected the returns on renewable projects, especially in Andhra Pradesh and Telangana, leading to credit downgrades.

“Even against this backdrop, the competitive price of renewables, averaging less than US$42/MWh, has led to an addition of 11 GW of renewable capacity expected in 2019 with solar contributing approximately 9 GW.

“We expect Indian power generation to grow by 5% on the back of improved economic growth in 2020. With several plants under construction, we expect installed capacity to increase by over 15 GW, mostly coming from new renewable installations. The economics of solar projects are expected to improve as safeguard duties on modules come to an end in July 2020, said Shrestha”

Higher rainfalls not only resulted in lower coal generation but also hindered domestic coal production. “We expect domestic production to improve in 2020,” added Principal analyst Pralabh Bhargava.

“In addition to a decline in coal-based power generation in H2 2019, cement and steel production were also down 1.8% and 0.3%, respectively. This resulted in a decline in coal demand. We expect coal consumption to grow only 0.5% in 2019 as compared to 8.5% in 2018 but expect consumption to improve in 2020 with a growth rate of 4.4%.

“With power generation and cement and steel production slowing, stocks of domestic coals have started to increase in India.

If the economy doesn’t pick up in early 2020, and power, cement and steel demand remain slow, we see a downside risk to our coal imports forecast.

“Currently, we are forecasting 181 Mt of thermal coal and 65 Mt of coking coal imports in 2020,” said Bhargava. fiinews.com