India’s gasoline boom stalls after massive growth in 2014-16

Gasoline consumption growth has been slowing since the middle of 2016. (REUTERS)
Updated 14 May 2017
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India’s gasoline boom stalls after massive growth in 2014-16

LONDON: India’s gasoline consumption has flattened out in recent months after tremendous growth between 2014 and 2016.
India’s motorists consumed 581,000 barrels of gasoline per day between February and April, according to the Petroleum Planning and Analysis Cell (PPAC) at the Ministry of Petroleum and Natural Gas.
Gasoline consumption rose by 4 percent compared with the same period a year earlier, a sharp slowdown from the 14 percent increase between 2015 and 2016.
Gasoline consumption growth has been slowing since the middle of 2016 after surging for the previous two years.
Consumption growth for most other fuels used for cooking and transportation has also been slowing for the last nine months.
Demand for liquefied petroleum gas and kerosene used for cooking, heating and lighting as well as diesel used for transport all show signs of leveling off or actually falling in the first four months of 2017.
The slowdown may have been compounded by the demonetization of large-denomination banknotes announced at the start of November as part of the government’s anti-corruption campaign.
Demonetization resulted in a sharp slowdown in sales of the cheaper motorcycles favored by first-time buyers in rural areas.
Rapid expansion in motorcycle ownership has been one of the major factors driving increases in gasoline demand.
Rising crude oil and refined fuel prices over the last year are also likely to have constrained the growth in consumption and other fuels.
Retail gasoline prices rose by around 10 percent between January 2016 and January 2017 while diesel prices climbed by almost 8 percent, according to data from the Ministry of Petroleum and Natural Gas.
India’s emerging urban and rural middle class is relatively sensitive to increases in the cost of fuel so rising prices have curbed demand growth.
Despite the recent slowdown in consumption growth for gasoline and other fuels, it is too early to determine whether the deceleration is temporarily linked to demonetization and price rises or something more lasting.
But India has been one of the most important sources of oil demand growth during the slump so any prolonged slowdown in consumption growth would make the task of global market rebalancing harder.
• John Kemp is a Reuters market analyst. The views expressed are his own.


Iraq’s move to rush oil bidding could deter some major companies

Updated 1 min 30 sec ago
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Iraq’s move to rush oil bidding could deter some major companies

  • Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April
  • Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks
BAGHDAD: Iraq is opening more of its untapped oil and gas resources to foreign developers, hoping to boost revenues after its costly war with the Daesh group, but analysts say the rushed bidding process — now timed to precede national elections — could draw a lukewarm response.
Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April, meaning the bidding would be held before May 12 national elections. Some believe Al-Luaibi, who is campaigning for a seat in parliament, moved up the date for political reasons.
Al-Luaibi hopes to represent the oil-rich southern province of Basra as a member of the Victory Alliance, which is led by Prime Minister Haider Al-Abadi, who is running for re-election.
“Personal and partisan interests are taking priority over national interests,” said Ruba Husari, managing director of the consulting firm Iraq Insight. “The objective of the exercise is aimed doubtlessly at portraying the ministry — and the minister — as aggressive in developing the nation’s resources ahead of the (elections).”
The Associated Press placed multiple calls to Al-Luaibi’s spokesman, who did not pick up. An aide to the spokesman said Al-Luaibi’s office was too busy with the election campaign to comment on the allegations.
In one of his campaign videos, Al-Luaibi tries to reassure a group of weary Iraqis who are worried about their future.
“Past years have wreaked havoc on everything,” a man in traditional Arab clothing says in the video, referring to the devastation caused by war. “Iraq’s wealth is your responsibility,” says a woman dressed in a conservative abaya — a loose black cloak that covers the body from shoulders to feet.
“I’m confident that with your determination I can protect the wealth of the generations,” Al-Luaibi says at the end of the video.
Thursday’s auction will be the fifth since Iraq opened its vast oil and gas reserves to international energy companies in 2009 for the first time in decades.
In previous bidding rounds, officials spent months hosting conferences, road shows and discussions with companies before issuing final contracts. Last month, the minister changed the date to April 15, but when companies asked for more time it was extended to Wednesday, and then to Thursday.
Ian Thom, principal analyst at energy consultancy Wood Mackenzie, said the tighter deadline could work against Iraq.
“Companies may be more cautious if they have not fully evaluated the bid terms,” he said. “This may result in bids being less competitive as companies seek a greater margin of safety.”
Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks.
Seven are located near the border with Iran, and three others are located near the Kuwaiti border, while the 11th is in the Arabian Gulf, in Iraqi territorial waters.
Encouraged by an improved security situation, Iraq in 2009 began to attract international oil companies to develop its vast untapped oil and gas reserves. Top among major oil companies are the US’s Exxon Mobil, Royal Dutch Shell, the UK’s BP, China’s CNPC and Russia’s Lukoil.
Since then, Iraq has awarded a handful of oil deals to develop major fields that hold more than half of its 153.1 billion barrels of proven oil reserves. Deals to tap natural gas resources were also awarded. As a result, Iraq’s daily production and exports have jumped to levels not seen since the late 1970s and early 1980s.
The country is now producing around 4.36 million barrels a day from Baghdad-controlled oil fields, up from nearly 2.4 million a day in 2009, and its daily exports averaged 3.450 million barrels a day last month, making it OPEC’s second-largest producer behind Saudi Arabia. Oil revenues make up nearly 95 percent of the country’s budget.
An economic crisis set in over the course of 2014, when the Daesh group swept across much of northern and western Iraq and oil prices plummeted. Iraqi forces concluded major military operations against the extremists last year, but large parts of the country were reduced to rubble.
In February, Iraq secured $30 billion from international donors to help rebuild devastated areas, far from the $88.2 billion Baghdad estimates it needs.
Earlier this month, the Iraqi Cabinet approved a five-year development plan with a target of 6.5 million barrels a day by 2022.
Iraq’s 2018 budget of nearly $88 billion comes with a deficit of more than $10 billion. It is based on a projected oil price of $46 per barrel and a daily export capacity of 3.8 million barrels.