GAS SPRING ON THE HORIZON?
The steep 70 percent spike in global LNG price is unlikely to curb domestic demand, but may crimp the margin of CGD companies to some extent as volume growth will support marketing margins, according to a report. Over the past five to six months, LNG prices in Asia have increased by over 70 percent, driven by rising Chinese imports. The spurt was also due to plant shutdowns and healthy demand from Japan, Korea, India and Pakistan, CRISIL said. It also noted that over the rest of this fiscal year, too, prices are expected to hold at $8-8.5/mmBtu for non- peak months and reach $10-10.5/mmBtu during the peak season even as supply is restored from plant turnarounds and incremental liquefaction capacity of 25 mt coming on stream. Last fiscal, after stabilising at $8-8.5/mmBtu during the lean months (between May-June and September- October), Asian spot LNG prices peaked at $10-10.50/ mmBtu, CRISIL said. What enhances the attractiveness of LNG as an industrial fuel is its improved competitiveness compared with alternatives like fuel oil and LPG. The regulatory push to expand CGD networks is also stoking demand. Though in the past, higher prices dented LNG demand in the country, things are different now with consumption rising 6-7 percent to 20 mt in FY18. At an average crude price of $75 a barrel, the landed cost of the fuel oil and LPG is expected to be $14.3/mmBtu and $19.2/mmBtu, respectively. In comparison, with LNG ruling at $9.5/mmBtu, industrial piped natural gas is expected to rule at $14.8/mmBtu, the report said. CRISIL expects LNG demand in the medium term to be supported by development of gas infrastructure in eastern region which is largely untapped. Government focus on increasing the share of gas in the overall energy mix and the development of LNG terminals and pipelines, bode well for demand over the medium to long-term, it said.
India is planning to set up a LNG import terminal in Myanmar as it looks to expand energy diplomacy in its neighbourhood. The terminal to import super-cooled natural gas will be in addition to the similar facilities planned by Indian firms in Bangladesh and Sri Lanka as part of larger plan of energy connectivity in the South Asian neighbourhood. Numaligarh Refinery Ltd in Assam is exploring supply of diesel to Myanmar and is looking at options to build fuel storage and distribution sector in that country. Petronet is also looking at building a 7.5 mtpa LNG import terminal in Bangladesh to feed that country’s energy needs using imported gas. In Sri Lanka, India is jointly developing Trincomalee oil storage tank farm and is also working on setting up an LNG terminal and a 500 MW LNG-fired power plant near Colombo. Bangladesh and Myanmar have large gas reserves which can be explored as alternate sources of gas supply. The national energy systems — gas and electricity networks — in the South Asian countries are largely isolated from each other. Currently only India, Bhutan and Nepal trade electricity.
IOC the nation’s largest fuel retailer, expects its upcoming 5 mtpa Ennore LNG terminal to start operations by October. The company is setting up the terminal at Ennore near Chennai in Tamil Nadu at a cost of ₹ 43 billion and has also made a provision to scale up the capacity to 10 mtpa, if required. IOC said that the company has already tied-up off-take agreements for 1.5 million tonne gas with consumers. IOC plans to connect the terminal to its Chennai Petroleum Corp Ltd refinery apart from facilities of Madras Fertilizers, Tamil Nadu Petro Products, Manali Petrol Products and other customers in the area. The firm is also working on laying a 1,385 km natural gas pipeline originating from the Ennore terminal to Nagapattinam in Tamil Nadu via Puducherry. The fuel retailer is also laying branch pipelines to Madurai, Tuticorin, and Bengaluru to meet the demand from multiple LNG consumers in the region. The laying of the complete 1,385 km pipeline will be carried out in phases. IOC is working on a capital expenditure plan of ₹ 228.62 billion, up 21 percent as compared to ₹ 188.48 billion spent last financial year (2017-18). IOC plans to spend 43 percent of the current fiscal’s capex on refinery segment, 11 percent on petrochemical projects, 12 percent on pipelines, 25 percent on marketing and the rest on exploration and production, gas projects and alternate energy.
Leading oil marketing companies such as Petronet LNG Ltd, IOC, BPCL have huddled together to put up close to twenty LNG stations on various national highways to provide for LNG fed truck transport movement following instruction from the government. That tenders would be issued for this purpose in next 15 days. This association of oil marketing companies have fructified on a pilot project base to feed roughly 5,000 trucks with LNG on leading five national highways, beginning 2019. The necessary permission to put up such LNG distribution center on national highways has already been given since the government has asked the oil marketing companies to put up such stations to attack the twin issues of fuel cost savings as well sufficiently addressing the issue pertaining to increasing fuel pollution. In addition, the higher element of efficiency would also be brought in with large number of trucks running on national highways with LNG as it is deemed to be a cleaner fuel with virtually no element of pollution in it, pointed out Mishra. He also clarified that India is inspired for this initiative partly with China where close to three lakh of trucks are operation on their highways with LNG fuel and the team of oil sector experts is currently visiting China to study there this system. In order to broad base the exercise of running trucks on LNG fuel to begin with and subsequently passenger buses also on the same fuel on national highways, the oil companies have already asked the truck manufacturers such as TATAs and Mahendras to accordingly make such trucks as can be fuelled with cheaper and cleaner fuel such as LNG and the like.
More industrial units here are set to switch over to LNG from conventional fuels or LPG. IOAGPL is nearing completion of distribution network to CSEZ in Kakkanad, where 12 industrial units have applied for securing LNG connections. According to the IOAGPL, they must lay pipes in two small stretches to complete the network to CSEZ. The IOAGPL has started registration and plumbing works at Aluva, Thrikkakara, Maradu and Eloor municipalities. IOAGPL has given 1,200 PNG connections in Kalamassery municipality. The company had got permission for digging up roads in six wards each at Kalamassery and Thrikkakara municipalities. A total of 8,500 registrations have been completed in these municipalities.
India’s renegotiated gas import deal with Russia’s Gazprom will save between ₹ 85 billion and ₹ 95 billion over the contract period ending 2040. GAIL (India) Ltd had in January taken advantage of the Russian company’s inability to deliver LNG from the previously agreed Schtokman project in the Barents Sea, to renegotiate price agreed in 2012. The first cargo of Russian natural gas under the long-term contract between GAIL and Gazprom Marketing & Trading Singapore was received on 4 June. The gas price was negotiated depending on many factors like project location, duration of contract and pricing formula. GAIL renegotiated the terms of the 20-year deal to import 2.5 mtpa of LNG, including price and volume ramp up. The contracted volume has been lowered from 2.5 mt to 0.5 mt in the first year, 2018-19; 0.75 mt in 2019-20 and 1.5 mt in the third year 2020-21. The contract period has been extended by three years to accommodate the supplies not taken in initial years as well as getting an additional 2 mt over-and-above the 50 mt it had agreed to take in 2012 over the 20 year contract period. India has been making the most of its position as one of the world’s biggest energy consumers to strike better bargains for its companies. Last year, India got US energy major Exxon Mobil Corp to lower the price of 1.5 mtpa of LNG from Gorgon project in Australia, saving ₹ 40 billion in import bill. India currently has four operational LNG import terminals at Dahej and Hazira in Gujarat, Dabhol in Maharashtra and Kochi in Kerala with a total LNG import capacity 27.5 mtpa. After regasification, the imported LNG is distributed to industries and domestic consumers through existing pipeline networks.
Adani’s group emerged as the biggest winner of gas retailing licences, winning rights to sell CNG in 11 cities, including Allahabad. Adani won the rights to retail CNG to automobiles and piped cooking gas to households in six cities on its own and another five in joint ventures with IOC according to results of the 48 of the 86 cities that were bid in the country’s biggest CGD bid round. According to the PNGRB, IOC on its own, won rights to four cities. Bharat Gas Resources Ltd, a unit of BPCL, won a licence each for six cities, the same number for which Torrent Gas Pvt Ltd. too made winning bids. State gas utility GAIL’s retailing arm, GAIL Gas, managed to get rights for three cities. When the bid round closed, IOC, BPCL and Adani Gas Ltd were the top bidders. Of the 86 cities offered for retailing of CNG to automobiles and piped cooking gas to households in the ninth CGD bid round, IOC bid for 34 cities on its own and another 20 in partnership with Adani Gas Ltd. Adani Gas on its own bid for 32 cities. Bharat Gas Resources Ltd bid for as many as 53 cities while GAIL Gas Ltd put in offers for 34 cities. Gujarat-based Torrent Gas Pvt Ltd bid for 31 cities while Gujarat Gas Ltd put in offers for 21 areas.
The Adani group now has 52 out of the 86 geographical areas tendered out by the government. Altogether, 400 bids with an estimated investment potential of ₹ 700 billion were received by the PNGRB. In total, the geographical areas on offer envisage starting CNG and PNG services in 174 districts across 22 states. GAIL Gas Ltd, the city gas distribution arm of GAIL, bid for close to 30 cities. Other subsidiaries of GAIL, Mahanagar Gas Ltd, and Gujarat State Petroleum Corp also put in bids. Adani Gas Ltd bid for 32 cities on its own and another 20 cities in joint venture with IOC. IGL, which retails CNG in the NCR, bid for 13 cities. India Gas Solutions Pvt Ltd, the RIL-BP joint venture formed to retail natural gas in India, looked at license for 15 cities but did not place any bid at the close of bidding.
According to PNGRB, a total of 400 bids were received for the 86 permits on offer. The government is targeting to raise the share of natural gas in primary energy basket to 15 percent, from 6.2 percent at present, within a few years. The bid round is also aimed at the target of giving piped cooking gas connection to 10 million households, roughly triple the current size, by 2020. In the new guidelines, maximum weightage of 50 percent has been given to the number of piped gas connections proposed in eight years from the date of authorisation, as compared to 30 percent earlier.
IOC the country’s largest fuel retailer and among the largest operators of crude oil, natural gas and petroleum products pipelines, has opposed a proposal by the downstream oil and gas regulator PNGRB to have unified tariff for inter-connected cross country gas pipelines. IOC voiced its opposition during an open house discussion held by PNGRB on Integrated authorization for unified tariff. The fuel retailer said that low pressure pipelines are not part of the proposal and unbundling of business and creation of an ISO should be done before unification of tariff. IOC also said it supports implementation of zonal tariff with entry-exit option, with unbundling and ISO. The open house discussion included participation from 17 companies including Shell Energy Marketing and Trading, GAIL, GMR Energy, Jindal Steel and Power, Hazira LNG, Kokata power utility CESC, Gujarat State Petronet, Torrent Power, RIL, BP India and ONGC, among others. The current system of tariff determination by the regulator PNGRB leads to multiple pipeline tariffs on customers who have contracted gas which flows from multiple pipeline operators. A unified tariff may do away with levy of multiple tariffs ensuring equitable distribution of gas and uniform gas-based economic development across the country, PNGRB had said in its consultation paper on the proposal last year. According to the regulator, implementation of unified tariff may jack up tariffs for some existing natural gas pipeline customers. Also, GAIL’s proposal of unification of pipeline tariffs only at the entity level may lead to cascading effect on tariffs as customers will have to pay additive tariff for using a pipeline carrying gas from two different entities. IOC, Shell Energy Marketing and Trading and BP India were also of the opinion that unification of tariff should only be done after legal unbundling of gas trading and transmission business has taken place and an ISO is set-up. GAIL said unbundling is not related to unification of tariff which is a separate exercise and should be implemented on standalone basis. The gas utility said creation of an ISO too is an independent exercise. India currently operates a 16,771 km long natural gas pipeline network with capacity to transport 369 mmscmd of gas.
Amid talk of splitting GAIL, global energy majors Royal Dutch Shell and BP plc have sought separation of natural gas marketing and transportation business before moving to a unified tariff for pipelines. At an Open House called by the sector regulator PNGRB to discuss ‘unified or pooling’ method for computing gas transmission tariffs instead of current postal or distance based transportation rates, GAIL was pitched against formidable combination of Shell and BP on the issue of unbundling. The petroleum ministry is looking at splitting GAIL into two firms to resolve the conflict of interest in it being both the transporter and marketer of natural gas. GAIL had proposed ‘unified or pooling’ method for calculating pipeline tariff instead of having postal tariffs where customers near the source of the gas pay less and the furthermost pays most. The pooled tariff is to be computed by pooling capital expenditure and operating expenses of all cross-country pipelines of a company and apportioning them over the cumulative volumes in such a way that allows 12 percent post-tax return. Shell Energy Marketing & Trading India Pvt Ltd, at the Open House, said it supported the idea of the unified tariff as it will enable development of the market and consequently lead to matured market. BP India supported unified tariff for all cross country interconnected pipelines of all entities and not of a single entity as otherwise, it would create distortion in the transition from entity wise unified tariff.
GEECL, a London Stock Exchange-listed Indian coal-bed methane producer, plans to invest ₹ 20 billion to complete drilling of the remaining 144 wells at its flagship Raniganj (South) license area located in West Bengal. The company’s production from its Raniganj (South) license area last financial year ended March 2018 increased 19.5 percent to 0.5 mmscmd as compared to 0.4 mmscmd produced in the previous fiscal. The company had already drilled 156 wells and the remaining ones could take around four years to drill from the date of commencement of work, adding the demand remained strong in the region. The firm’s sale of coal-bed methane gas in the first two months of the first quarter ended June 2018 rose 43 percent to 0.3 mmscmd. The company had over 30 customers and the increase in sales could be attributed to anchor customers buying more gas and new customers coming in the fold. GEECL’s cash profit increased 331 percent to $11 million at the end of 2-17-18 due to increased sales and better price realisation. The company’s average sales last fiscal increased 23.4 percent to 0.3 mmscmd and average delivered sale price of gas increased to $10.90/mmBtu as compared to $10.07/mmBtu realised previous financial year. The company is taking a hit on account of stranded taxes arising due to exclusion of natural gas from the GST but added the firm remains hopeful of the inclusion of natural gas in the GST as the oil ministry has been pushing for that in the GST Council. The company continues to eye the unconventional hydrocarbon space in India and was hoping that additional data of the country’s shale resources is made available soon.
Asian spot LNG prices rose as a heatwave gripped Japan and high temperatures swept across South Korea and parts of China boosting cooling demand though relief is set to come from new Russian supplies. Spot prices for September LNG-AS delivery in Asia were assessed at $9.75/mmBtu up 25 cents from the previous week. LNG imports into South Korea hit record levels in the first half of the year but such volumes will not be sustainable as anticipated nuclear start-ups will leave an average of only six reactors offline over the rest of the year. The second train at Novatek’s Arctic Russian operations in Yamal has started operations. Novatek said that the second train would start operations in the third quarter of this year, the trader said. Papua New Guinea launched a tender offering a cargo for 22-29 August and the bids were seen to be bullish although the result is not yet known. However, Russia’s Sakhalin II cargo offered in the first half of September was sold to a shareholder of the plant for an estimated $9.70/mmBtu. Potential transaction cost range of $9.65-$9.70/mmBtu is anticipated. September prices are expected around the $9.75/mmBtu mark. Aside from Yamal, traders were also waiting on new supplies from Japan’s Inpex, which expects its Ichthys plant in Australia to start up in September.
US dry natural gas production should rise to an all-time high of 2.296 bcm/day in 2018 from 2.086 bcm/day in 2017, according to the EIA’s Short Term Energy Outlook. The latest August output projection for 2018 was down from the EIA’s forecast of 2.303 bcm/day in July but would still easily top the current annual record high of 2.099 bcm/day produced on average in 2015. EIA also projected US gas consumption would rise to an all-time high of 2.253 bcm/day in 2018 from 2.101 bcm/day in 2017. In 2019, EIA projected output would rise to 2.381 bcm/day, while usage would slip to 2.25 bcm/day. After the US became a net gas exporter for the first time in 60 years in 2017, EIA projected US net exports would rise to 56 mcm/day bcm/day in 2018 and 152.910 mcm/day in 2019, up from 11.32 bcm/day in 2017.
The US Energy Department cleared the way for faster approval of small scale exports of natural gas including LNG to Latin American countries by issuing a rule that does away with a public interest review of the shipments. Previously, companies that wanted to export natural gas to non-free trade agreement countries were subject to a DOE public interest review. With the final rule, the DOE will grant approval to export natural gas and LNG to non-free trade agreement countries, provided they export no more than 1.465 bcm/year of natural gas, and that the proposed export qualifies for a categorical exclusion under the DOE’s requirements under federal environmental law. Many Latin American countries do not have enough natural gas demand to support LNG imports from large terminals and conventional LNG tankers. But US companies are trying other ways to get gas to the market. American LNG Marketing LLC, has exported more than 145 cargoes of small-scale LNG shipments from its facility in Florida to Barbados and Bermuda over the past few years.
Shale gas developer Cuadrilla became the first operator in Britain to receive final consent from the government to frack an onshore horizontal exploration well, paving the way for commercial production. The government said it had granted approval for so-called hydraulic fracturing to take place at Cuadrilla’s Preston New Road site in northwest England. Fracking involves perforating wells and fracturing rocks by injecting liquids, sands and chemicals to suck in oil and gas. Following fracking of the first two horizontal wells, Cuadrilla will run an initial flow test of the gas produced from both for about six months, the firm said. In May, the government announced plans to speed up planning applications to support development of the country’s shale gas industry. The British Geological Survey estimates shale gas resources in northern England alone could contain 37.633 bcm of gas, 10 percent of which could meet the country’s demand for almost 40 years. However, it is impossible to know exactly how much shale gas might be underground – and more importantly, how much can be extracted – until fracking has started in earnest. A private firm is looking to import LNG to South Australia starting in 2020, around the same time as two other proposed import projects, looking to fill a supply gap as domestic gas gets sucked into LNG exports. Venice Energy plans to submit a development application to the South Australian government within the next month to park a FSRU in Port Adelaide. If regulatory approvals come through by March, construction could begin by June 2019, he said. The LNG import plan is part of a three-stage project with a budget estimated at A$750 million to A$800 million ($556 million to $593 million). Australia’s government commodities forecaster said in a recent report that imports could help cap soaring gas prices, but the economics might not work as it might be tough to find cheap LNG beyond 2022. Energy consultants Wood Mackenzie forecast in a report last week that only one LNG import terminal would be needed until the 2030s.
US President Donald Trump eased his tone about a Russian natural gas pipeline to Germany after a one-on-one meeting with President Vladimir Putin, shifting from the harsh criticism he’d levied in Europe. The Nord Stream 2 pipeline, which would double Russia’s current capacity to deliver natural gas direct to Germany under the Baltic Sea and circumvent Ukraine, a major supply route to the European Union, has been a sore point between the US and its allies over the past months.
Russian natural gas producer Novatek delivered the first ever LNG cargo to China via the NSR alongside the Arctic coast, which drastically cuts delivery time to Asian consumers. The shipments of LNG from Yamal LNG project via the NSR to China cuts transportation time and costs in comparison to other routes such as Suez Canal. China’s National Energy Administration said China National Petroleum Corp will start lifting at least 3 mt of LNG from Yamal starting in 2019. The passageway is important for Yamal because it cuts shipping times to its main customers in Asia by nearly half – to 15 days – and thus saving time and Suez Canal fees incurred on the westward route. The $27 billion Yamal LNG plant developed by Novatek and France’s Total despite US sanctions started exporting in December, but cargoes ferried on ice-class LNG tankers have only sailed to Europe so far. The NSR, which is crucial for Yamal LNG, typically opens for summer navigation from June until November but severe ice conditions this year have delayed the start of deliveries. Novatek plans to develop another large-scale project of producing the frozen gas – Arctic LNG 2, which is set to start producing LNG in 2022-2023.
The European Commission has earmarked €278 million ($325 million) for four LNG import terminals due onstream between 2018 and 2020. Poland’s LNG import terminal that came onstream in 2016 had already received €332 million. US and EU vowed to increase trade in LNG. EU financing programs will disburse €50.8 million to an LNG terminal expansion in Greece, €124 million for one on the island of Krk in Croatia and €101.2 million for a Cyprus project.
China’s state planner issued new draft rules to give private companies access to the country’s oil and gas infrastructure, including crude oil pipelines, gas pipelines, LNG terminals and underground gas storage. The new draft rules followed requests from the country’s energy operators, especially in natural gas, for equal access to the nation’s natural gas pipeline network, the NDRC said. The draft marks the first time the government has published a concrete plan to promote fair access to gas-related facilities, including LNG terminal and storage. It is Beijing’s latest move in its ongoing reform of the oil and gas sector to keep it from being monopolized by state companies. The NDRC proposed adopting thermal units as the standard measurement of gas instead of tonnes, saying it’s an easier way to calculate gas transportation cost.
Tanzania wants to build a pipeline to pump natural gas to neighbouring Uganda, another step in the two countries’ bid to expand energy cooperation. Tanzania Petroleum Development Corp said that the pipeline would start from its capital Dar es Salaam, then pass through Tanga port on the Indian Ocean and to Mwanza, a port on Lake Victoria before crossing the border to Uganda. It said it was looking to hire a contractor to conduct a feasibility study to determine current and future natural gas demand “by identifying all potential customers”. Tanzania boasts estimated recoverable natural gas reserves of over 1.614 trillion cubic meters mostly in offshore fields in the south of the country.
An Egyptian company plans to start importing gas from Israel for re-export in the first quarter of 2019, sources in the country’s energy sector said, under agreements signed in February to buy $15 billion worth of gas over 10 years. Partners in Israel’s Tamar and Leviathan offshore gas fields said in February they would supply the private Egyptian company Dolphinus Holdings with around 64 bcm of gas over a decade. The deal has stirred controversy in Egypt, which until a few years ago exported gas to Israel. Egypt hopes the imports will help in its efforts to become a regional energy hub.
Malaysian oil company Petronas said it had delivered its first LNG cargo to Japan’s Hokkaido Electric Power Company Inc on 1 August. The delivery marks the beginning of its supply to Hokkaido Electric via a 10 year agreement signed on 2 March 2017, according to Petronas. The delivery was done via Malaysia LNG Sdn Bhd, a Petronas subsidiary, and the cargo was delivered from Petronas’ Bintulu LNG complex in the East Malaysian state of Sarawak, according to Petronas. Vietnam’s state oil firm PetroVietnam said it has signed an agreement with two Japanese companies to sell gas from a South China Sea oil block close to waters disputed by Beijing. Vietnam is struggling to maintain its crude oil and gas output amid declining production from key fields and ongoing pressure from China that has affected work on some projects. PetroVietnam said that maritime tensions with China will hurt its offshore exploration and production activities this year. The agreement will pave the way for the project to start commercial gas production from the third quarter of 2020, PetroVietnam said.
Inpex Corp announced that its operated Ichthys LNG project has commenced the production of gas from its wells. The development marks “the start of approximately 40 years of operations,” according to Inpex. At full capacity, the Ichthys LNG project’s offshore facilities are expected to produce 45.3 mcm of gas per day and 85,000 barrels of condensate per day, according to Total, one of the stakeholders in the project. The Ichthys LNG project involves liquefying natural gas lifted from the Ichthys gas-condensate field, offshore Western Australia, at an onshore gas liquefaction plant constructed in Darwin, Northern Territory.
Italian oil company Eni said that the production capacity of Egypt’s giant Mediterranean Zohr gas field stood at 1.6 bcm/day and would reach 2 bcm/day by September. Eni raised €50 million ($58 million) as an advance on future gas supplies to Egyptian state-owned partners to finance Zohr. Zohr, located in the offshore Shorouk block about 190 km north of Port Said, was discovered in 2015 and holds an estimated 849.5 mcm of gas. Egypt has been seeking to speed up production from recently discovered fields, with an eye to halting imports by 2019.
Ukraine extended a freeze on gas prices until at least September 1, reducing its prospects of securing more money from the IMF needed to keep its war-battered economy on a stable footing. Ukraine must raise gas prices to market levels in order to qualify for more aid under a $17.5 billion IMF program. It initially agreed to raise prices under a jointly agreed formula but has since postponed price rises a number of times. The government may shy away from potentially unpopular measures like gas price hikes with presidential and parliamentary elections due next year. Ukraine has received no IMF money since April 2017 due to a slowdown in reforms, putting the country in a more financially precarious position as it must repay around $15 billion of foreign currency debt in the next two years.
Woodside Petroleum Ltd, Australia’s biggest independent oil and natural gas company, has decided to pull out of Sempra Energy’s Port Arthur LNG export project in Texas, Sempra said. Sempra and Woodside had agreed to share the cost of developing Port Arthur in February 2016. The project, which Sempra said could cost $8 billion to $9 billion, includes two liquefaction trains capable of producing about 11 mtpa of LNG, up to three storage tanks and facilities to load LNG onto ships.
Global independent tank storage company Vopak said it has inked an agreement with Engro Corp Ltd to buy a 29 percent stake in Pakistan’s first LNG import facility. Vopak will invest in Elenergy Terminal Pakistan Ltd, whose subsidiary EETPL owns the LNG facility in the country’s Port Qasim, it said. The facility, which started operations in 2015, consists of an LNG jetty and a pipeline connected to a FSRU which has been chartered by EETPL for 15 years. The pipeline supplies gas directly to the grid of EETPL’s sole customer, state-owned Sui Southern Gas Company Ltd.
JERA manages an LNG supply portfolio of 35 million tonnes a year primarily through long-term contracts with producers, but so-called destination restrictions prevent the firm from reselling any unwanted volumes to third parties. Backed by Japan’s Fair Trade Commission, JERA wants to end these restrictions and become a regional supplier. It also aims to cut reliance on long-term LNG deals as a share of its overall portfolio to half by 2030, from 80 percent now. Other major LNG buyers are also boosting their trading activities. PetroChina set up its own LNG trading desk to gather market intelligence and trade cargoes, while Azerbaijan’s state-run oil company Socar hired two LNG traders last year.
LNG: liquefied natural gas, CGD: city gas distribution, mmBtu: million metric British thermal units, mt: million tonnes, LPG: liquefied petroleum gas, mtpa: million tonnes per annum, MW: megawatt, IOC: Indian Oil Corp, km: kilometre, BPCL: Bharat Petroleum Corp Ltd, IOAGPL: Indian Oil Adani Gas Private Ltd, CSEZ: Cochin Special Economic Zone, PNG: piped natural gas, CNG: compressed natural gas, PNGRB: Petroleum and Natural Gas Regulatory Board, IGL: Indraprastha Gas Ltd, ISO: Independent System Operator, ONGC: Oil and Natural Gas Corp, RIL: Reliance Industries Ltd, mmscmd: million metric standard cubic meter per day, GEECL: Great Eastern Energy Corp Ltd, GST: Goods and Services Tax, US: United States, EIA: Energy Information Administration, bcm: billion cubic meters, DOE: Department of Energy, FSRU: Floating Storage and Regasification Unit, NSR: Northern Sea Route, EU: European Union, Petronas: Petroliam Nasional Bhd, NDRC: National Development and Reform Commission, IMF: International Monetary Fund, EETPL: Engro Elenergy Terminal Pte Ltd
13 August. Iran is keen to invest in the Rs 300 billion expansion of Chennai refinery but the fate of banking channels to route such investment is uncertain in view of US (United States) sanctions against the Persian Gulf nation, Indian Oil Corp (IOC) Chairman Sanjiv Singh said. IOC plans to pull down the 1 million tonnes per year (mtpa) Nagapattinam refinery of its subsidiary, Chennai Petroleum Corp Ltd (CPCL) and build a brand new 9 mtpa unit in next 5-6 years. National Iranian Oil Company (NIOC), which holds 15.4 percent stake in CPCL, is keen to participate in the expansion project, Singh said. Singh said the expansion was to originally cost Rs 27,460 crore but is now estimated to cost anything between Rs 25,000 crore and Rs 30,000 crore. The government later disinvested 16.92 percent of the paid-up capital. The company was listed in 1994. IOC acquired the government stake in 2000-01 and holds 51.89 percent stake in CPCL while NIOC has 15.40 percent. Asked about US sanctions against Iran impacting oil supplies, Singh said the company has “adequate alternate supplies” ready to meet any shortfall that may arise from Iran.
Source: Business Standard
13 August. Monetisation of heavy oil discovered from the oldest sedimentary rock of Rajasthan now seems a reality with trials for producing heavy oil from 570 million year old rock beds being started by Oil India Ltd (OIL). OIL has claimed a major breakthrough for extraction of heavy crude oil from Jaisalmer fields after almost 26 years of its discovery. Highly viscous heavy oil was discovered by OIL in infra-Cambrian rock (570 million years old) in the Baghewala area of the district in 1991. However, in case of Baghewala heavy oil scientists opine that it originates from algae/fungi types of plant as only these plants were available during that time of earth’s evolution. In the last 25 years, several attempts have been made to get sustainable production. However, due to high viscous nature of the crude, these efforts have failed. Recent experiment by steam injection using mobile steam generator has given encouraging result. Based on the recent production from steam injection, the sale of heavy crude oil has become a reality through ONGC (Oil and Natural Gas Corp)’s pipeline at Mehsana to IOC (Indian Oil Corp)’s refinery at Koyali (Gujarat).
Source: The Economic Times
9 August. India launched its second auction of small discovered oil and gas (O&G) blocks, as the south Asian nation looks to quickly monetise its hydrocarbon resources. The bidding for 59 fields will begin in the first week of September and will close on 18 December. The contracts will be awarded in January, Oil Minister Dharmendra Pradhan said. The blocks offered under the latest round has reserves of about 1.4 billion barrels, he said.
Source: Reuters
8 August. At least 43 workers were injured after a fire broke out following a boiler blast in the refinery of Bharat Petroleum Corp Ltd (BPCL). The incident took place at the public sector oil firm’s plant on the Mahul Road in Chembur area of East Mumbai. Forty-three workers were injured in the incident, Shahaji Umap, Deputy Commissioner of Police (Zone-VI), said. After preliminary treatment at BPCL’s first aid centre, 22 of them were allowed to go home, whereas 21 were shifted to nearby hospital in Chembur, he said.
Source: Business Standard
8 August. Hindustan Petroleum Corp Ltd (HPCL) does not have any more oil purchases from Iran at least till November as the trigger date for the US (United States)-led sanctions inches closer. The US has imposed the sanctions from November 4, threatening companies to fully wind down activities with Iran or risk exclusion from the American financial system. This has led to insurers refusing to extend their services to crude oil tankers directed from Iran. HPCL had to cancel a consignment last month.
Source: The Hindu Business Line
8 August. Indian Oil Corp (IOC) has bought 6 million barrels of US (United States) crude for delivery in November to January, as the nation’s top refiner scouts for alternatives to Iranian oil ahead of impending US sanctions. IOC will buy 2 million barrels of Mars oil in November, a combination cargo containing 1 million barrels each of Eagle Ford and Mars in
December and 2 million barrels of Louisiana Light Sweet (LLS) in January, IOC Finance Director A K Sharma said. India has asked refiners to prepare for a drastic cut or even zero imports from Iran after the US withdrew from the 2015 nuclear deal and announced a renewal of sanctions on Tehran. While some sanctions started from 6 August, others, most notably in the petroleum sector, will be applied from 4 November. Lower purchases by Chinese buyers is also aiding the flow of US oil to India.
Source: Reuters
14 August. BP Plc and its partner Reliance Industries Ltd (RIL) will produce at least 10 percent of India’s total gas demand from the Krishna-Godavari (KG) basin by 2022, Sashi Mukundan, the company’s region president and India head, said. Experts highlight that this has the potential to revive the ailing fertiliser segment in the country by competing with the re-gasified liquid natural gas (RLNG), as the difference between RLNG and domestic deepwater gas would be at least 25-30 percent by then. The three projects in the Block KG D6 integrated development plan include R-Series, satellite cluster and MJ (D55), which the companies expect will revive the fortunes of the block. The three projects put together have around 3 trillion cubic feet of discovered gas resources, where the companies are investing around Rs 400 billion. The firms have already placed contracts to the tune of around $2 billion. At present, fertiliser sector consumes about 40 million metric standard cubic meter per day (mmscmd), of which around 50 percent is met through the allocation of Administered Pricing Mechanism (APM) gas supplies, while the remaining is met through RLNG. By 2022, industry expects the fertiliser demands to zoom to 60 mmscmd. If KG-basin gas gets successful in replacing RLNG, it may save at least $3.42 per million metric British thermal unit based on the current pricing. Domestic natural gas in India is priced around $3.06 per million metric British thermal units (mmBtu), while for deepwater gas, it has a ceiling of $6.78 per mmBtu. If KG-gas can replace LNG by then, it may lead to a savings of around $1 billion per annum for the sector. In KG-D6 Block, RIL has a participating interest of 60 percent, BP has around 30 percent, while the remaining 10 percent is owned by Niko Resources. BP took over 30 percent stake in multiple oil and gas blocks in India operated by RIL way back in 2011. Since then, the two companies have invested around Rs 130 billion ($2 billion) in deep-water exploration and production to date.
Source: Business Standard
13 August. Indian Oil Corp (IOC) plans to invest Rs 200 billion in city gas distribution projects in next 5-8 years as it bets big on gas business to complement its traditional oil refining and marketing business, its Chairman Sanjiv Singh said. The firm, which owns a third of India’s oil refining capacity and has 44 percent market share of fuel business, sees compressed natural gas (CNG) replacing some of the petrol and diesel consumed in vehicles and LPG (liquefied petroleum gas) getting replaced by piped cooking gas in households. It wants to be in these businesses to maintain its market leadership position. IOC, which among all PSUs (Public Sector Undertakings) bid most aggressively in the latest city gas distribution (CGD) licences, is hoping to net licences to retail CNG to automobiles and piped natural gas to households and industries in about 20 cities, he said. IOC, which has 80.7 million tonnes per annum of refining capacity (33 percent of the total in India), is looking to commission a 5 million tonnes a year liquefied natural gas (LNG) import terminal at Ennore in Tamil Nadu before the year-end and has booked capacity on similar planned terminals on both east and west coast. IOC currently operates city gas distribution (CGD) networks in Agra and Lucknow through Green Gas Ltd, its joint venture with GAIL (India) Ltd. It is also implementing CGD projects in Chandigarh, Allahabad, Panipat, Ernakulam, Daman, Udhamsingh Nagar and Dharwad through a joint veture
with Adani Gas Ltd (IndianOil-Adani Gas Pvt Ltd).
Source: Business Standard
9 August. Essar Oil and Gas Exploration and Production (EOGEPL) announced that it has signed a 15-year gas sale and purchase agreement with GAIL (India) Ltd. The Essar Group subsidiary said that GAIL had won the bid for the contract which will help EOGEPL monetise its entire coal-bed methane (CBM) production of 2.3 million metric standard cubic meter per day (mmscmd) from the Raniganj East block. Of the 500 wells to be dug at the Raniganj East CBM block, EOGEPL has already completed drilling of 346 CBM wells.
Source: Business Standard
8 August. Maharashtra Natural Gas Ltd (MNGL) is facing a unique problem — the company has infrastructure ready to provide over two lakh new PNG (piped natural gas) connections in Pune and Pimpri Chinchwad, but there are no takers. According to MNGL, the pendency has piled up over the last two to three years. MNGL said one of the main reasons for people unwilling to get piped gas is that the pipeline may affect the aesthetics of the house. According to MNGL, another one lakh connections are pending due to absence or delay in digging permission from the civic bodies. MNGL said that ready-to-fit connections are available in and around areas including Bibvewadi, Model Colony, Kothrud, Baner-Balewadi, Kharadi, Hadapsar, Kondhwa, Wanowrie, Hinjewadi, New Sangvi, Chinchwad, Moshi, Rahatni, Thergaon and Wakad.
Source: The Economic Times
12 August. Coal India Ltd (CIL), the world’s biggest miner, has pushed back its ambitious 1 billion tonne production target by at least two years owing to the existing ground realities. The government had earlier set a target of 1 billion tonnes (bt) coal output by FY’2019-20. Although CIL has been investing towards establishing railway connectivity with its mines and procuring rakes in order to evacuate more coal, a sharp rise in renewable energy sources is compelling the miner of the dry fuel to review its earlier production goals, the company has said. CIL subsidiary Northern Coalfields and the railways are jointly investing around Rs 6,000 crore in Madhya Pradesh to lay new tracks and converting the existing ones into double gauge enabling it an additional 15 million tonnes (mt) of the fuel capacity. CIL has said that there was an urgent need to revisit its one billion tonne output programme following changes in the environmental paradigm and coal demand. The company had produced 567 mt coal in FY’18 and targets to produce 630 mt in the current fiscal.
Source: Business Standard
12 August. Tamil Nadu’s power utility imported poor quality coal during 2012-16, resulting in excess payment of Rs 813.68 crore, the Comptroller and Auditor General (CAG) has found, recommending an investigation. The audit also found that the Tamil Nadu Generation and Distribution Corp (TANGEDCO) released Rs 5,767.13 crore to supplier of 60% of the coal consignments without obtaining a mandatory Certificate of Country of Origin (COO), a violation of its own tender conditions. The consignments which CAG said were without COO were from Indonesia, country of origin of coal imports in the DRI (Directorate of Revenue Intelligence) letter. As per tender conditions, CAG said, the Gross Calorific Value (GCV) of imported coal was to be 6,000 kilo calorie per kilogram. Price was to be adjusted according to a formula if GCV went below 6,000.
Source: The Economic Times
8 August. The government is considering the recommendations of a sub-group with regard to revision of present royalty rates on coal. The Centre had earlier set up a sub-group under the Chairmanship of Coal Additional Secretary for examining the issue of revision of royalty rates on coal and lignite, Coal Minister Piyush Goyal said. Goyal said in the last three financial years and in 2018-19 (till July 31), two mines — Marki Mangli-I and Majra in Maharashtra — have been auctioned to Topworth Urja and Metals and Jaypee Cement Corp, respectively.
Source: Business Standard
14 August. Chandigarh residents will have to pay more for using electricity for next three months. The UT (Union Territories) electricity department will charge 14 paisa per unit for domestic consumers using between 0 and150 units. Additional charge of 24 paisa per units has been imposed in 151 to 400 slab, while consumers using more than 400 units will have to pay 26 paisa per unit. In the commercial category having single phase, 24 paisa per unit for using 0-150 units will be charged, while there no charge imposed in the slab of 151-400 units and above 400 units. Commercial users having three phase will be charged 26 paisa per unit and 61 paisa per unit in the slab of 151 to 400 and above 400, respectively. Consumers having large supply connections will have to shell out of 26 paisa per unit more. Those using small and medium supply connections will be charged 25 paisa and 29 paisa per unit, respectively. UT superintending engineer M P Singh said the change will come into effect in the billing cycle of August 1. FPPCA (fuel and power purchase cost adjustment) charges are not levied in the agriculture category. The charge is the difference between per unit actual cost of power purchase and per unit approved cost of power purchase. The electricity department generates bills for domestic customers bi-monthly. Domestic consumers have been divided into four groups of 50,000 each. They pay bills in six cycles a year. Bills of commercial consumers are generated every month. According to official records, there are 2.16 lakh electricity consumers, out of which, 1.75 lakh fall in the domestic category. The department has regular billing of around 94% of consumers.
Source: The Economic Times
13 August. More consumers are taking to paying their electricity bills online, as the electricity department’s revenue from online payments has increased by more than Rs 20 crore from last year. The department received Rs 53.9 crore from online payments for July this year. The figure for last July stood at Rs 33 crore. Electricity department said that around 40,000 consumers pay their bills online. However, the percentage of consumers opting for this method is still low – around 7% – and far below the national average of 20%. The Union power ministry has ranked Goa as 24th in e-payments. In this, the state even lags behind Bihar, Uttar Pradesh and Jammu and Kashmir. Meanwhile, the department said it isn’t responsible for problems consumers face while making payments, and stress that these are issues with the bank’s gateway. The electricity department has ‘anytime payment’ machines manned by helpers at the department offices at Mapusa, Panaji, Vasco, Margao and Ponda. These, however, are only available to consumers during the day. In July, around 12,000 consumers (or 2%) used this machines, accounting for an income of Rs 6 crore for the month.
Source: The Economic Times
10 August. Bihar Chief Minister (CM) Nitish Kumar flagged off power projects worth over Rs 7,500 crore and expressed confidence that each household in the state would be electrified by the end of this year. He expressed confidence that his government would meet its target of electrifying each household in the state by the end of this year. He said that three power units in the state – Kanti, Navinagar and Barauni – have been handed over to the NTPC which was likely to “ensure better power generation and availability of electricity to consumers in Bihar at cheaper rates”. He said his government was providing subsidy to domestic consumers besides developing special “agriculture feeders” to cater to the electricity requirements of those involved in farming.
Source: Business Standard
9 August. The Maharashtra Electricity Regulatory Commission (MERC) has allowed Adani Power to recover additional expenses incurred by its subsidiary Adani Power Maharashtra Ltd (APML) due to introduction of the Goods and Service Tax (GST). The company put the total impact of the GST to be Rs 0.35 per unit, which amounts to about Rs 402.5 crore till February 2018. APML had filed a petition with the MERC in April to adjust tariffs of electricity sold to the state from its 3,300 MW Tiroda power plant. The company sought the electricity regulator’s approval to offset financial consequences of GST and evacuation facility charge by Coal India Ltd (CIL).
Source: The Financial Express
8 August. Prime Minister (PM) Narendra Modi has reviewed the progress of household electrification under the ‘Saubhagya’ scheme, focusing on last mile connectivity and distribution of power in urban and rural areas, the PMO (Prime Minister’s Office) said. Progress in household electrification under the ‘Saubhagya’ initiative was reviewed. In September 2017, the PM had launched the ‘Pradhan Mantri Sahaj Bijli Har Ghar Yojana Saubhagya’ to ensure electrification of all willing households in the country in rural as well as urban areas. Under the scheme, states and Union Territories are required to complete the works of household electrification by December 31, 2018. The beneficiaries for free electricity connections would be identified using Socio Economic and Caste Census (SECC) 2011 data. However, un-electrified households not covered under SECC data would also be provided electricity connections under the scheme on payment of Rs 500 which will be recovered by distribution companies in 10 instalments through electricity bills.
Source: Business Standard
14 August. The government’s plan to revive stalled hydropower projects through a bailout package of Rs 160 billion is lying in a limbo for a year now. Lack of funds through budgetary support is a major reason for the delay, as the finance ministry asked the ministry of power to rework the scheme. Last year, the Centre drafted Rs 160 billion package to revive projects with a capacity of nearly 11,000 MW. This includes 4 percent interest subvention to projects totalling 11,639 MW, creating a Hydro Power Development Fund (HPDF). The installed capacity of hydropower projects has remained at around 40,000 MW for the past three years, while that of the renewable energy sector has increased about 20 percent in the same period. In the past decade, renewable energy (solar and wind power) has grown by 89 percent while hydro has grown only 28 percent.
Source: Business Standard
14 August. Adani Green Energy Ltd (AGEL) said that Solar Energy Corp of India (SECI) has annulled the tender won by its arm Mahoba Solar (UP) Private Ltd. The SECI had reportedly cancelled the tenders for 2,400 MW capacities out of 3,000 MW went under the hammer in July 2018.
Source: Business Standard
13 August. The finance ministry said that safeguard duty will not be insisted upon on import of solar cells for the “time being” in deference to interim directions passed by the High Court of Orissa. India had imposed safeguard duty on solar cells imports from China and Malaysia for two years to protect domestic players from steep rise in inbound shipments. The duty was imposed following recommendations by the Directorate General of Trade Remedies (DGTR) under the commerce ministry. It further said that till further direction from the revenue department, solar cells whether or not assembled in modules or panels “would, in respect of safeguard duty, be assessed provisionally” on furnishing of simple letter of undertaking/bond by the concerned person.
Source: Business Standard
11 August. The Jharkhand Renewable Energy Development Authority (JREDA) said it has prepared a framework for the state rooftop solar power policy 2018 with an objective to produce 500 MW power through grid-connected rooftop solar plants by 2022. JREDA said the new policy will facilitate rooftop solar power projects in the state’s urban settlements. The policy, which was revised last year, aims to push Jharkhand’s total solar power production capacity to 2,650 MW by the year 2020, including large scale and rooftop solar plants.
Source: The Economic Times
10 August. The work of installing solar panels for all buildings of Nashik Municipal Corp (NMC) under the Smart City Scheme will begin in few days. Tender for solar panels have been approved. The letter of award has been issued to the contractor. In a few days, the work order will be issued. The rooftop solar equipment will be installed in 16 NMC buildings on a pilot basis by a private agency.
Source: The Economic Times
10 August. India aims to increase the use of biofuels to cut its oil import bill by Rs 120 billion ($1.7 billion) by 2022 and reduce carbon emissions, Prime Minister Narendra Modi said. India is the world’s third-biggest oil importer and consumer and ships in about 80 percent of its crude needs, but is gradually building capacity to increase its output of biofuels. The South Asian nation plans to build 12 bio-refineries costing 100 billion rupees to produce fuel from items including crop stubble, plant waste and municipal solid waste, Modi said. Modi said building the bio-fuel refineries would create 150,000 new jobs, but did not give a timeframe for when they would all be up and running. India, a signatory to the Paris Climate deal, plans to reduce its carbon footprint by increasing ethanol content, a sugar byproduct, in its gasoline to 10 percent by 2022 and to 20 percent by 2030, Modi said.
Source: Reuters
8 August. The government will come out with a single bid for setting up 25 GW of solar capacity in Ladakh, Power and Renewable Energy Minister R K Singh said, and asserted that renewable energy is a must for sustainable development. He said that India will achieve the target of having 175 GW of renewable energy before 2022. He said that the government will come out with renewable bids with storage component.
Source: Business Standard
8 August. CNG (compressed natural gas), the clean burning fuel, is all set to fix air pollution problem in the holy city with as many as four retail outlets of CNG likely to supply the fuel in next couple of months even as the CNG-kit installation facility is yet to begin. Gujarat Gas Ltd would open four retail outlets in the city, out of which permission to three outlets had been granted, Amritsar Deputy Commissioner Kamaldeep Singh Sangha said. He said the administration had always been encouraging to use clean fuel to bring down the pollution levels in the city. Sangha said that CNG was not only economical, but was one of the preferred alternative fuel sources for vehicles. The administration had earlier taken several measures to bring down the air pollution level from the city but to no avail. Diesel-driven auto-rickshaws contribute maximum to the air pollution especially in the vicinity of the Golden Temple.
Source: The Economic Times
8 August. Prime Minister (PM) Narendra Modi reviewed the progress of key infrastructure sectors of power, renewable energy, petroleum and natural gas, coal, and mining. The installed power generation capacity in India has risen to 344 GW. India’s energy deficit, which stood at over four percent in 2014, has shrunk to less than one percent in 2018. Significant capacity additions have been made in transmission lines, transformer capacity, and inter-regional transmission. Modi urged the officials to work towards ensuring that the benefits from an increase in solar energy capacity reach the farmers through appropriate interventions such as solar pumps and user-friendly solar cooking solutions.
Source: The Economic Times
8 August. Luminous Power Technologies is looking at doubling revenue to 20 percent in next four-years from solar appliances and residential roof top products. Luminous Power said that rural area is a high potential market for solar appliances and rooftop solar products. In the last 10 years alone, Luminous has invested close to Rs 1,000 crores in North India alone and it plans to significantly ramp up investments in the next three to five years in R&D to develop innovative home electrical solutions for the India market.
Source: The Economic Times
14 August. Venezuela’s heavily subsidized domestic gasoline prices should rise to international levels to avoid billions of dollars in annual losses due to fuel smuggling, President Nicolas Maduro said. Venezuela, like most oil producing countries, has for decades subsidized fuel as a benefit to consumers. But its fuel prices have remained nearly flat for years despite hyperinflation that the International Monetary Fund has projected would reach 1,000,000 percent this year.
Source: Reuters
13 August. Workers at three of Total’s North Sea oil and gas platforms began a 12-hour strike, as planned, after talks with the company failed, the Unite union said. The affected platforms are Alwyn, Elgin and Dunbar. More discussions could be held although nothing had been fixed, the union said. The workers are striking over proposed changes to their working rotas and pay. The next, and last, planned strike by the rig workers will be on 20 August and will last 24 hours. About 45 out of 60 Total workers were set to strike at the three platforms. Outside contractors also work at the fields but they are not involved. The strike means that production at the fields will be shut down for that period. The three fields’ oil production contributes about 45,000 to 50,000 barrels per day (bpd) to the Forties and Brent Blend crude streams.
Source: Reuters
13 August. Iraq signed a $369 million contract with Petrofac to build a new crude-processing facility in the giant Majnoon oilfield. Under the deal terms, work to build the new facility which has a capacity to produce 200,000 barrels per day (bpd), should be completed in 34 months, Basra Oil (BOC) said. Once the new oil facility is operational, Majnoon’s production will rise to around 450,000 bpd. The field iS now producing around 230,000 bpd, BOC said. Iraq plans to invite service companies soon to compete for a tender to drill new 80 oil wells in Majnoon as part of a development plan to boos output from the field, BOC said. In June, Royal Dutch Shell exited the Majnoon oilfield in southern Iraq and handed over its operations to the BOC.
Source: Reuters
13 August. OPEC (Organization of the Petroleum Exporting Countries) forecast lower demand for its crude next year as rivals pump more and said top oil exporter Saudi Arabia, eager to avoid a return of oversupply, had cut production. OPEC said the world will need 32.05 million barrels per day (bpd) of crude from its 15 members in 2019, down 130,000 bpd from last month’s forecast. The drop in demand for OPEC crude means there will be less strain on other producers in making up for supply losses in Venezuela and Libya, and potentially in Iran as renewed US (United States) sanctions kick in. OPEC said its oil output in July rose to 32.32 million bpd. Although higher than the 2019 demand forecast, this is up a mere 41,000 bpd from June as the Saudi cut offset increases elsewhere. Rapid oil demand that helped OPEC balance the market is expected to moderate next year. OPEC expects world oil demand to grow by 1.43 million bpd, 20,000 bpd less than forecast last month, and a slowdown from 1.64 million bpd in 2018.
Source: Reuters
10 August. The United Arab Emirates (UAE) plans to build an oil pipeline connecting Eritrea and Ethiopia, the latest sign of the Gulf state’s increasing involvement in the Horn of Africa. The pipeline will run from Eritrea’s port city of Assab to Ethiopia’s capital Addis Ababa. Landlocked Ethiopia began extracting crude oil on a test basis from reserves in the country’s southeast in June and will need access through Eritrea in order to export it.
Source: Reuters
10 August. China’s decision to remove crude oil from its latest tariff list in an escalating trade war with the United States (US) was a relief to state oil firms prompted by a strong lobbying effort by main importer the Sinopec Group. Dropping crude oil from the final tariff list on $16 billion in US goods announced late underscores the growing importance of the US as a key global producer and critical alternative supply source for top importer China, which is seeking to diversify its oil purchases. Removing crude imports, worth roughly $8 billion annually based on Sinopec’s earlier forecast of 300,000 barrels per day (bpd) for 2018, also gives Beijing room to maneuver in future negotiations with Washington, especially as it may soon lose some Iranian oil shipments due to reimposed US sanctions. The revision came after Sinopec – Asia’s largest refiner and biggest buyer of US oil – suspended new bookings until at least October over worries that a 25 percent tariff would prohibit it from finding buyers in China.
Source: Reuters
10 August. Oil markets have entered a brief period of calm but a storm might be looming later this year when new US (United States) sanctions are poised to slash supplies of Iranian oil, the International Energy Agency (IEA) said. Oil prices have rallied close to $80 per barrel, their highest since 2014, on concerns about supply shortages but cooled in recent weeks as Libya regained some lost production and Washington signaled it could give Asian buyers of Iranian oil some exemptions from sanctions for next year. However, the US said it was still seeking to force Iran’s oil customers to stop purchases completely in the long run. Saudi Arabia is producing around 10.4 million barrels per day (bpd) and could in theory raise output to above 12 million bpd. But such a move would leave the world with virtually no spare capacity to cushion against possible supply disruptions in producer countries like Libya, Venezuela or Nigeria. Besides supply fears, oil prices are being supported by healthy demand growth that has repeatedly surprised on the upside in recent years despite a recovery in prices. The IEA kept its 2018 oil demand growth forecast unchanged at 1.4 million bpd but raised its 2019 forecast by around 110,000 bpd to 1.49 million bpd.
Source: Reuters
10 August. American drivers are unlikely to see prices at the pump fall if the Trump administration releases crude from the Strategic Petroleum Reserve (SPR) because US (United States) oil production already is sky high, analysts said. The potential release, ahead of the US midterm elections in November, would aim to bring relief to customers who have seen gasoline jump 50 cents a gallon in the past year. Even if the release temporarily sends futures contracts lower, there is no guarantee that pump prices would follow and remain down, according to analysts and market participants. The reserve, which contains about 660 million barrels of crude, can be tapped in event of an emergency disruption to domestic supply and has been used to avoid price spikes in case of past disruptions. Any distribution would be a non-emergency sale, analysts said, with refiners, trading houses and others able to bid on barrels stored underground at four Gulf Coast locations. If the reserve is tapped, much of the crude oil and refined products that would be produced could go overseas, say energy experts. The US does not lack for crude. Gulf Coast exports of crude oil and products hit an all-time record in April 2018, when the region exported nearly 6.3 million barrels per day, according to US Energy Information Administration data.
Source: Reuters
8 August. Mozambique’s government approved contracts giving exclusive rights to energy companies to act on concessions awarded to them to explore for oil following four years of negotiations and delays that threatened to derail the projects. The companies could now go ahead with mining operations to tap offshore oil reserves that experts say are enough to supply energy to Britain, France, Germany and Italy for over 20 years. Norwegian company Statoil, Italy’s Eni, Exxon Mobil, Delonex Energy, South Africa’s Sasol and Mozambique’s national oil and gas company ENH were awarded the exploration rights in the area of Mozambique’s Northern Zambezi basin, known as block 5, in 2015.
Source: Reuters
13 August. PetroChina Company may temporarily halt purchases of US (United States) liquefied natural gas (LNG) spot cargoes through the winter to avoid potential tariffs amid a trade conflict between the US and China. Under the plan, PetroChina would boost buying of spot cargoes from other countries or swap US shipments with other nations in East Asia to avoid paying additional tariffs. China said this month it was considering a 25 percent tariff on US LNG, which had been missing from previously targeted goods, in a direct hit to American gas exporters. PetroChina in February signed a 25-year deal to buy US LNG from Cheniere Energy Inc., with a portion of that supply expected to start this year. While China is currently the third-largest buyer of US LNG, American cargoes only made up about 5.7 percent of its imports over the last year, according to Sanford C. Bernstein & Co.
Source: Bloomberg
13 August. Indonesia’s energy ministry opens bids for six oil and gas (O&G) blocks, the second round in 2018. Half the blocks are for exploration, and the other half for production, director general for oil and gas, Djoko Siswanto said. One of the production blocks on offer, in the Makassar Strait, was previously operated by Chevron.
Source: Reuters
11 August. US (United States) liquefied natural gas (LNG) company Cheniere Energy Inc said it had signed a 25-year deal to supply Taiwan’s CPC Corp, which CPC valued at roughly $25 billion. Cheniere said it will sell 2 million tonnes of LNG per year on a delivered basis to the oil and gas company, starting in 2021. It said the purchase price will be pegged to the Henry Hub monthly average, plus a fee. The United States has become a major LNG exporter in the last two years, mostly due to the ramp up of Cheniere’s Sabine Pass terminal in Louisiana. The Houston-based company is also building the Corpus Christi terminal in Texas.
Source: Reuters
10 August. Russia largely failed in its bid to overturn the European Union (EU)’s gas market rules in a World Trade Organization (WTO) ruling published. Russia launched the dispute in 2014, claiming that the EU’s “Third Energy Package” and the EU’s energy policy overall unfairly restricted and discriminated against Russia’s gas export monopoly Gazprom. The 50 percent cap could only be exceeded if 3 billion cubic meters of gas was released annually at a fixed price to competing suppliers on the Czech market. The WTO panel also agreed that Croatia, Hungary and Lithuania had discriminated against Russia by requiring a security of energy supply assessment for foreign, but not domestic, pipeline operators. Gazprom said it had always said that European energy policy should take gas suppliers’ interests into account, and therefore it was satisfied with the points where Russia had won.
Source: Reuters
9 August. European nations are far behind Mexico and China when it comes to receiving liquefied natural gas (LNG) from the US (United States), but the region is making its biggest effort to date to change that. Europe pledged to import more LNG in a bid to diversify imports, while America is seeking new markets for its expanding production of the fuel. Russia is currently Europe’s biggest supplier. Europe received about 10 percent of total US exports last year, up from 5 percent in 2016 after the American shale gas revolution went global with the opening of the Sabine Pass export facility on the country’s Gulf of Mexico coast. Russian gas supplies to Europe are also linked to crude, and moves in the commodity affect gas prices at the region’s hubs. US supplies, in contrast, are tied to low-cost shale gas at the benchmark Henry Hub in Louisiana. Europe has also pledged to reduce its increasing dependency on the Russian fuel by supporting the development of new LNG terminals.
Source: Bloomberg
8 August. Chinese gas distributor ENN has received its maiden cargo for the country’s first major privately-owned liquefied natural gas (LNG) import terminal, ship tracking data showed. The LNG tanker ‘Stena Blue Sky’ arrived at Zhoushan port after loading the cargo at Qatar’s Ras Laffan LNG terminal on July 22, the data showed. ENN has signed long-term deals including sales and purchase agreements with Chevron Corp and Australia’s Origin Energy and also has an agreement to buy LNG from Total. The deals total about 1.5 million tonnes per year of LNG. China overtook South Korea as the world’s second-largest LNG importer in 2017 with imports of 38 million tonnes, 46 percent higher than the year before. The imports soared after the government ordered millions of homes to switch to natural gas and electric heating from coal to counter rising air pollution. To meet the higher demand and to reduce their dependence on supply from state-owned companies, Chinese companies are building their own LNG terminals to import the fuel directly.
Source: Reuters
8 August. US (United States) liquefied natural gas (LNG) company Tellurian Inc said it remains on track to begin construction of its Driftwood LNG export terminal in Louisiana in the first half of 2019 and begin operations in 2023. Driftwood is one of more than two dozen LNG export projects under development in the US and seeking customers so they can start construction and enter service in the next decade. US LNG exports have almost quadrupled from 183.9 billion cubic feet (bcf) of natural gas in 2016 to 706.4 bcf in 2017, worth about $3.3 billion, and are on track to rise to over 1,000 bcf in 2018, making the country one of the world’s biggest exporters of the super-cooled form of natural gas. One billion cubic feet of gas is enough to fuel about five million US homes for a day.
Source: Reuters
14 August. Japanese utilities and global mining giant Glencore have settled an Australian thermal coal import contract for April 2018-March 2019 at $110 a tonne. The deals were struck between Glencore and Japanese utilities such as Shikoku Electric, Chugoku Electric and Kansai Electric after bilateral talks. The deal marks a breakthrough after Japan’s Tohoku Electric and Glencore, the world’s biggest exporter of seaborne thermal coal, failed earlier this year to agree an annual supply deal which had in the past been used as an industry benchmark. At $110 per tonne, the contractual price came in nearly 30 percent higher than an annual supply price a year earlier, and is 16 percent above a deal for October 2017-September 2018, reflecting a tighter global market for the world’s dominant power generation fuel. Australian spot thermal coal cargo prices have hit several six-year highs in the past months, and at $120 per tonne remain a third above this year’s lows from April, pushed up by a heatwave across the northern hemisphere this summer as well as output cuts in China, the world’s biggest consumer of coal. The deals between Japanese utilities and Glencore give coal markets welcome clarity after Tohoku and Glencore abandoned their talks on an annual contract which traditionally set prices for the region. With annual imports of around 115 million tonnes, Japan is one of the world’s biggest importers of thermal coal. Its utilities buy around 40 percent of all Australian thermal coal exports.
Source: Reuters
10 August. Three South Korean firms were caught importing coal and iron from the North last year, Seoul said. More than 35,000 tonnes of North Korean coal and iron worth 6.6 billion won ($5.8 million) were imported into the South between April and October last year, the Korea Customs Service said. News of the apparent breach comes after a UN (United Nations) report accused the North of evading sanctions by continuing to export coal, iron and other commodities as well as carrying out illegal ship-to-ship transfers of oil products at sea.
Source: Business Standard
9 August. At least four cargoes of US (United States) coal worth $30 million are headed to China as Beijing prepares to hit imports with hefty 25-percent tariffs, threatening a niche supply of the fuel even as China’s appetite for foreign coal shows no sign of abating. The vessels, carrying a combined 335,000 tonnes of coal, are the only confirmed cargoes in transit from the US to China, and are scheduled to land in time to avoid the new duties. The penalties will come into effect on 23 August after Washington plans to start collecting duties on Chinese products of the same value. Coal was also in the draft list issued in June. The US shipped 3.2 million tonnes of coal to China last year, up from less than 700 tonnes in 2016, making it China’s seventh largest supplier, although well behind top supplier Australia with nearly 80 million tonnes.
Source: Reuters
8 August. The good news is that residential consumers are paying 18 percent lower since 2012 and 8 percent below their global counterparts. According to a survey done by Australian-based consulting firm International Energy Consultants (IEC), Meralco’s tariffs have decreased to P 7.77 per kilowatt hour (kWh) in January 2018 from January 2012’s price point of P 9.57 per kWh. The bad news is we’re still the third highest electricity rates in Asia behind Japan and Singapore. Japan and Singapore were reported to be among the top Asian countries with the highest electricity rates, placing Meralco’s average tariff 24th highest out of 46 markets surveyed. The study identified markets such as Thailand, Indonesia, Malaysia, Korea and Taiwan as having the lowest electricity rates due to annual subsidies amounting to $ 800 billion from their respective governments. These subsidies are in the form of cash grants, subsidized fuel or deferred expenditure. To reduce energy costs for the consumer, IEC recommended a focus in adding retail competition on top of more power generation facilities.
Source: Power Philippines
14 August. British renewable energy investor Quercus said it will halt the construction of a €500 million ($570 million) solar power plant in Iran due to recently imposed US (United States) sanctions on Tehran. The solar plant in Iran would have been the first renewable energy investment outside Europe by Quercus and the world’s sixth largest, with a 600 MW capacity. Iran has been trying to increase the share of renewable-produced electricity in its energy mix, partly due to air pollution and to meet international commitments, hoping to have about 5 GW in renewables installed by 2022. In June, before the US-imposed sanctions, more than 250 companies had signed agreements to add and sell power from about 4 GW of new renewables in the country, which has only 602 MW installed, Iranian energy ministry data showed. Quercus has a portfolio of around 28 renewable energy plants and 235 MW of installed capacity. The 600 MW plant it aimed to construct in Iran would be the firm’s largest investment.
Source: Reuters
10 August. China’s State Council said it would promote the use of China’s nuclear industry’s independent technological standards worldwide, aiming to play “a leading role” in the global standardization process by 2027. Its two major nuclear project developers, China National Nuclear Corp (CNNC) and the China General Nuclear Project Corp (CGN), are jointly promoting an advanced third-generation reactor known as the Hualong One to overseas clients, with CGN aiming to deploy the technology at a proposed nuclear project at Bradwell in England. China aims to raise its total nuclear capacity to 58 GW by the end of the decade, up from 37 GW at the end of June. Capacity could reach as high as 200 GW by 2030, and China also has ambitions to dominate the global nuclear industry via its homegrown technologies.
Source: Reuters
9 August. Australia’s states held off approving a plan to end more than a decade of climate and energy wars and spur investment in new power supply, disappointing industry seeking certainty on energy policy. Prime Minister Malcolm Turnbull is pushing a National Energy Guarantee (NEG) in a bid to bring down electricity prices, which have more than doubled over the past decade, and ensure supplies following a string of blackouts in 2016 and 2017. Energy Minister Josh Frydenberg said after a meeting with state governments that it had been “an important step forward” for the plan, which has been under negotiation for nearly a year. The policy needs unanimous approval from Australian states to go ahead and requires federal legislation, but Victoria, Queensland and the Australian Capital Territory pushed for more ambitious emissions targets. Victoria, where the government faces an election in November and stands to lose seats to the Greens, want emissions reduction targets that can only be strengthened over time, with targets to be reviewed every three years, and future targets to be set by regulation rather than legislation. Under the plan, power retailers, led by Origin Energy, AGL Energy and Energy Australia, would be required to meet reliability and emissions targets. The aim is to ensure there is enough “dispatchable” energy, power to back up intermittent wind and solar power, and cut carbon emissions from the sector by 26 percent from 2005 levels, in line with Australia’s Paris Climate Accord target. Modeling showed the NEG would bring down wholesale power prices by more than 20 percent from where they would be without the policy and the share of renewable energy generation sent out in the national market would more than double by 2030.
Source: Reuters
US$ Million
| Fuel Type | 2016-17 | 2017-18 |
% change FY18 w.r.to FY17 |
| Gas (LNG) | 6004.74 | 8121.29 | 35.2 |
|
India’s Total Imports (ITI) (of All Commodities) |
3,84,355.56 | 4,65,578.29 | 21.1 |
|
Gas imports as % of ITI |
1.56 | 1.74 | – |
Direction of India’s Gas Imports (in Value terms) for 2017-18
This is a weekly publication of the Observer Research Foundation (ORF). It covers current national and international information on energy categorised systematically to add value. The year 2018 is the fifteenth continuous year of publication of the newsletter. The newsletter is registered with the Registrar of News Paper for India under No. DELENG / 2004 / 13485.
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