MonitorsPublished on Mar 21, 2023
Energy News Monitor | Volume XIX, Issue 37

Quick Notes

Underground Coal Gasification: Option for Decarbonisation and Source of Hydrogen?


The first pilot project of underground coal gasification (UCG) in India was carried out in the Vastan mine block, Surat, Gujarat by ONGC (Oil & Natural Gas Corporation Limited) in collaboration with Gujarat Industries Power Company Ltd (GIPCL) in 2010. ONGC took up the Vastan Mine block site belonging to GIPCL in Nani naroli, Surat district, Gujarat as an R&D Pilot Project to establish UCG technology in collaboration with National Mining Research Center-Skochinsky Institute of Mining (NMRC-SIM), Russia. Agreement of Collaboration (AOC) to co-operate in the services, operations, development and research related to UCG in India with ONGC was extended up to March 2020. A number of sites were jointly identified by ONGC and Neyveli Lignite Corporation Limited (NLC) for studying their suitability to UCG. These are Tadkeshwar in Gujarat and Hodu-Sindhari & East Kurla in Rajasthan. One more site was jointly identified by ONGC & GMDC (Gujarat Mineral Development Corporation Limited) in Surkha in Bhavnagar district, Gujarat. The data of all the fields have been analysed for evaluating the suitability of these sites for UCG. All the sites have been found suitable for UCG exploration.  Progress on the UCG projects has been slow, but could it become an option for decarbonising coal in India?

Basic Technology

Underground Coal Gasification (UCG) is the partial in-situ combustion of the coal seam to produce usable gas through the same chemical reactions that occur in surface gasifiers. This is achieved by injecting steam and air (or oxygen) into the coal seam which is then ignited to initiate gasification. Typically temperatures above 1000°C are required for the gasification to proceed. The products and by-products of gasification vary depending upon the nature of coal, the temperature, the pressure and also whether air or oxygen is used. The product gases (synthetic gas or syngas) consist primarily of carbon monoxide (CO), carbon dioxide (CO2), hydrogen (H2), methane (CH4) and to a lesser extent hydrogen sulphide (H2S) and some higher molecular weight pyrolysis products. Regardless of use, syngas has to be cleaned up using commercially available technologies to remove impurities such as particulates, tar and sulphur compounds such as H2S and carbonyl sulphide (COS) to make it usable.

Products of UCG


The hot syngas from UCG can be used to make steam to drive a steam turbine that generates electricity or it can be combusted to produce steam to drive an electric turbine.  Syngas can also be directly fed into a fuel cell that can tolerate CO to generate low voltage electricity that can be stepped up and fed into the grid.

Chemical Feedstock

Syngas can be used as chemical feedstock (after its H2 to CO ratio is suitably balanced) to produce methanol, hydrogen, ammonia and other chemical products using the Fischer-Tropsch process. Central Institute of Mining & Fuel Research (CIMFR), India has identified methanol and Liquid Petroleum Gas (LPG) as potential products of gas produced from UCG operations.  CIMFR produces 5 litres of syngas a day from its pilot UCG project and converts 1.5 tonnes of coal to methanol in its methanol rectifier.

Production of Hydrogen

A stronger case for UCG lies in the fact that coal is the obvious source for hydrogen which is potentially an important near zero carbon energy carrier of the future. UCG as a hydrogen generator coupled with a solid oxide fuel cell (SOFC) to generate electrical power directly has been studied by Indian experts. Integration with SOFC gives two specific advantages: (1) The anode exhaust from SOFC that has high operating temperature can be used to produce steam required for the operation of UCG as well as for the reforming of the syngas for the SOFC (2) SOFC can also serve as a selective absorber of oxygen from air for an efficient system of a carbon-neutral electrical power generation from underground coal. Thermodynamic analysis of the integrated system shows considerable improvement in the net thermal efficiency over that of a conventional combined cycle plant.


Energy Self Sufficiency

Only a small fraction of Indian coal is mined under-ground with most of the rest mined through strip-mining. Large reserves of coal are available at depths exceeding 300 metres that are less suitable for conventional mining technologies. This restricts available coal resources despite large reserves in paper.  Indian coal was considered ‘unmineable’ because it was under pristine forest lands, too deep, low grade or in narrow seams can be gasified thus increasing coal resource availability enormously.   India also has large deposits of lignite which is difficult to mine economically because of its low energy content. According to estimates made in 2006, about 66 percent of low grade Indian coal at intermediate depth could be gasified underground to produce synthetic natural gas, methanol, petrol, diesel, hydrogen and also used as feedstock for fertiliser production.

Emission Reduction

High ash content in Indian coal presents an operational challenge in utilisation of domestically mined coal in surface equipment such as gasifiers and boilers.  UCG has unique potential in recovering heating value from high ash coal. No coal would be transported at the surface which would also reduce cost and local pollution footprint associated with coal transport by rail (or trucks); it would also reduce pollution associated with coal stockpiling. As conventional coal mining is eliminated with UCG, operational costs and surface damage are reduced and mine safety is increased as accidents such as mine collapse and asphyxiation are eliminated. No surface gasification systems are needed for UCG and hence capital costs would be lower.  More importantly UCG with separation and reinjection of CO2 underground can decouple rising electricity demand from rising green-house gas (GHG) emissions.   The growing interest in hydrogen as a zero carbon energy carrier also justifies a revisit of the UCG option.

Carbon Management

Carbon capture, utilisation and storage (CCUS) have emerged as a key technology component to reduce greenhouse gases (GHGs) mainly CO2 through geological sequestration as observed in the report by the Intergovernmental Panel on Climate Change (IPCC). Geological carbon storage (GCS) is similar to CCUS.   Storage of CO2 in the void space made by the UCG process in the reactor zone has a number of advantages: (1) UCG creates a fairly large cavity (in the order of 5-8 metres (m) in diameter) between wells. A single burn with 300 m spaced wells would create a void of 6000-15000 cubic metres which can store about 8000 tonnes of CO2 (2) Production and injection wells are available for CO2 delivery and appropriate plugging and abandonment.  This will substantially reduce the cost of CCUS as the wells account for 40-60 percent of CCUS costs (3) Physical response of coal to CO2 may enhance sequestration.  When oxygen is used for gasification, water-gas shift reactors (reacting CO with steam to produce CO2 and H2) to convert almost all the CO to CO2 from which CO2 can be readily removed by a number of available technologies. CO2 can be stored in deep saline aquifers, depleted gas fields, active oil fields, and depleted and unmineable coal seams all of which are frequently found near coal seams chosen for UCG which makes the UCG-CCUS package an attractive option for carbon management. As coal swells and plasticisers in the presence of CO2, fractures and porosity may be closed quickly which will immobilise and attenuate potential CO2 leakage.


Induced Subsidence

The void created by UCG may cause significant deformation both in the remaining coal and surrounding rocks.  Heating, quenching, water flux and potential roof and wall collapse may seriously compromise the integrity of the cavity. These are difficult to predict. In general, the sides of the cavity move inward, the floor upward and the roof downward (subsidence). The magnitude and form of subsidence is a function of many factors including seam depth (thickness and overburden), effective rock stiffness and yield strength. Predictions may be inaccurate because many rocks exhibit nonlinear stress-strain behaviour.

Contamination of Groundwater

UCG operations cannot be controlled to the same extent as surface gasifiers which poses the risk on account of high temperature and pressure in the cavity. Some of the coal in UCG may have geologic or hydrologic features that increase environmental risks to unacceptable levels. The Larger reaction zone of full-scale UCG may create an  extensive groundwater depression zone creating flow into rather than away from the combustion zone. Because UCG is a high-temperature, high-pressure process, the production and transport of toxic organic compounds from the burn cavity will be a consequence no matter what type of coal is gasified. Deeper UCG locations have to use higher pressure and temperature to maintain the burn zone which increases the risk of outward flow to regional groundwater. The Use of the UCG site for CCUS may increase the mobility of many contaminants because organics are typically highly soluble in CO2 and metals are mobilised under acidic aqueous conditions.  By maintaining the direction of groundwater flow into rather than away from the cavity the mobility of soluble contaminants could be greatly reduced.


The economics of UCG-based power plants are not readily available as there are no UCG power plants operating in the western world and cost estimates are difficult to obtain for plants that are operating in China and Russia.  In general, a UCG-based power plant is very similar to an Integrated Gasification Combined Cycle (IGCC) power plant minus the surface gasifier.  The UCG plant also needs much smaller gas clean-up equipment because both tar and ash content in UCG based syngas is substantially lower than that obtained from a surface gasifier. These factors give UCG based power plants a significant economic advantage over IGCC plants and Supercritical pulverised coal (SCPC) plants. Estimates put the cost of an UCG power plant at roughly half that of an SCPC and IGCC plants and the cost of electricity generated using a UCG plant at roughly a fourth of that from an IGCC or SCPC plant.

The economics of the UCG has major uncertainties that are likely to persist. UCG is an inherently ‘unsteady’ state process and both the flow rate and the heating value of the product gas will vary over time.  Any operating plant must take this factor into account. Many important process variables such as the rate of water influx, the distribution of reactants in the gasification zone and the growth rate of the cavity can only be estimated from measurements of temperature and product gas quality and quantity. Changes in the quantity and quality of gas produced will have a significant impact on the economics of the project. On the other hand, the capital expenditure of UCG projects can be substantially lower than equivalent surface gasifiers because the purchase of a gasifier is not required. Operating expenses on account of coal mining, coal transport and ash management are also substantially reduced in UCG.  Even for projects that have substantial environmental monitoring and safety facilities UCG plants have maintained their economic advantages.

Overall, UCG carries strategic advantages such as the use of a domestic resource that will contribute to energy security, cost competitiveness over alternative clean technologies and low demand on scarce land resources in India. However, it also carries huge environmental and geological risks. To make the right choice for India, careful analysis of the costs and benefits of UCG through detailed pilot projects will be required.

Source: Singh, A K Underground Coal Gasification in India, Central Mining Research Institute, Dhanbad

Monthly News Commentary: Natural Gas

LNG Imports Improve as Prices Ease



According to the country’s top gas importer India’s liquefied natural gas (LNG), imports are set to recover as global prices ease. Asian spot LNG prices have fallen due to mild weather in Europe and ample inventories, from an average of US$30-$35 per million metric British thermal units (mmBtu) in the December quarter to around US$17/mmBtus. India wants to raise the share of gas in its energy mix to 15 percent by 2030 from 6.2 percent at present. However, a spike in global gas prices last year, triggered by the Russia-Ukraine conflict, cut demand for cleaner fuel from price-sensitive Indian customers. India’s gas imports in October and November declined by about a fifth to about 1.8 million tonnes (MT) from this fiscal year’s peak of 2.2 MT in May, according to government data. Due to low local demand, Petronet operated its 17.5 MT a year Dahej LNG terminal on the west coast at 68 percent capacity in the December quarter. The capacity use has improved to 81 percent and is expected to rise further as global prices ease. Petronet supplies gas, mostly procured under long-term deals with Qatar and Australia to Indian energy companies for sale to end-users. These companies have also booked capacity at Dahej to import gas directly. In the previous quarter, Petronet levied an INR 8.5 billion (bn) (US$104.80 million (mn)) penalty on Indian companies for not taking the committed volumes of gas from its Dahej import facility.

Adani Total Private Ltd expects to receive 2.2 MT of LNG at its terminal at Dhamra on India’s eastern coast during the year ending March 2024. Adani Total has a 20-year take-or-pay contract to provide regasification services to state-run Indian Oil Corp for 3 MT of LNG per annum at the Dhamra terminal. GAIL (India) Ltd has a similar 1.5 MT per annum deal. Adani Total – in which French oil and gas major TotalEnergies has a 50 percent stake – said it was still in discussions on how much gas it would supply Indian Oil and GAIL, adding that a final decision had not been taken yet. India’s LNG imports fell for the second straight year in 2022, mainly due to fewer imports by utilities as the country ramped up coal-fired power production at the expense of natural gas.

Petronet LNG, India’s top gas importer, will seek up to 1 million tonnes per annum (mtpa) in additional LNG supplies when it renews its long-term deal with Qatar. Petronet, which is currently purchasing LNG from Qatar at US$16 per mmBtu, has until the end of this year to renew its deal. India’s LNG imports fell for the second straight year in 2022, mainly due to fewer imports by utilities as the country ramped up coal-fired power production at the expense of natural gas. The energy-hungry nation expects deeper penetration of city gas distribution to drive LNG demand in the coming years. Petronet, which is currently purchasing 1.42 mtpa of LNG from Exxon Mobil Corp’s Gorgon project in Australia, will receive an additional 0.6 mtpa under the deal from 2025-26.


Indian Oil Corporation (IOC) has asked CNG distribution companies in Gujarat to discontinue CNG (compressed natural gas) supply to 35 petrol pumps whose monthly sale of petrol and diesel is less than 100,000 litre. IOC has asked the dealers to furnish a bank guarantee for the sale of CNG. In view of the development, the Federation of Gujarat Petroleum Dealers’ Association (FGPDA) has threatened to stop selling CNG at 600 pumps across Gujarat from mid-February. Petrol pumps sell CNG in the state under tie-ups between oil marketing companies like IOC, HPCL and BPCL and gas distribution companies like Sabarmati Gas, Gujarat Gas and Adani Gas. According to FGPDA, IOC shot off a letter to these gas distribution companies asking them to discontinue CNG supply to 35 pumps, without informing the dealers. Most of these 35 pumps are in remote and rural areas where CNG supply is essential. According to FGPDA, the petrol-diesel sale has nothing to do with CNG sale and these pumps have been selling CNG for the past 8 to 10 years. According to the dealers, they pay to the CNG distributor company the next day and there was no issue of outstanding.

With the government placing a greater emphasis on gas production from challenging fields, experts predict that gas distribution in cities may improve with a relatively lower cost. The expansion of CGD networks across 407 districts has the potential to make gas accessible to more than 70 percent of the population. These distribution networks will enable the supply of cleaner cooking fuel to households, businesses, and other industrial and commercial facilities, as well as fuel for transportation. According to a report, the government will prioritise gas from challenging fields for CNG and piped natural gas (PNG) households, if the bidding prices are comparable. This approach also has the added benefit of reducing trading margins on gas resale in difficult fields. Prioritising CGDs would allow them to replace expensive spot gas with cheaper domestic gas.


Almost 80 percent of work on the country’s first-ever natural gas pipeline running along an express highway, connecting Mumbai to Nagpur has been completed. Public sector undertaking GAIL (India) Ltd is building the pipeline along the Samruddhi Mahamarg. The current pipeline would ultimately connect Mumbai to Jharsuguda in Odisha, with Nagpur in between. GAIL has recently got the go-ahead to lay the pipeline from Nagpur to Jharsuguda leg also. It has been learnt through sources that the project started in August 2021, and out of more than 680 km to be covered from Mumbai, the pipeline has already been laid over 530 km. Haryana City Gas, which has bagged the contract for supply in Nagpur, is in talks with GAIL to secure the gas supply. It is learnt to have initiated the process to get approvals for laying its network in the city too.

Policy & Governance

Reliance Industries Ltd RIL and its partner BP plc suspended a planned auction for the sale of natural gas from their eastern offshore KG-D6 block after the government altered marketing rules to cap margins. In a notice, RIL and its partner BP Exploration (Alpha) Ltd (BPEAL) said the auction has been suspended indefinitely. E-bidding for the sale of 6 million standard cubic metres per day (mscmd) of gas was originally planned for 18 January but was later pushed back first to 19 January and then to 24 January. On 13 January, the ministry of petroleum and natural gas published new rules for the sale and resale of gas produced from discoveries in the deep sea, ultra-deepwater and high pressure-high temperature areas with marketing and pricing freedom. While end consumers were allowed to resale any unconsumed gas, traders participating in the auction were allowed to resell subject to a maximum trading margin of INR 200 per thousand cubic metres. In the auction that RIL-BP launched on 29 December 2022, the gas was intended for sale to end consumers who were not permitted to resale any unconsumed gas. RIL has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 — the largest among the lot — were brought into production in April 2009, and MA, the only oilfield in the block, was put into production in September 2008. While the MA field stopped producing In September 2018, output from D-1 and D-3 ceased in February 2020. Since then, RIL-BP is investing US$5 bn in bringing to production three deepwater gas projects in block KG-D6 — R-Cluster, Satellites Cluster, and MJ — which together are expected to meet about 15 percent of India’s gas demand by 2023.

Rest of the World


Italian energy company Eni and Libya’s National Oil Corporation (NOC) signed a US$8 bn gas production deal aimed at boosting energy supplies to Europe despite the insecurity and political chaos in the North African country. The deal, signed during a visit to Tripoli by Italy’s Prime Minister (PM) Giorgia Meloni, aims to increase gas output for the Libyan domestic market as well as exports, through the development of two offshore gas fields. The Output will begin in 2026 and reach a plateau of 750 million cubic feet per day.

The European Union (EU)’s gas price cap, which launches next month, could impact financial stability and potentially curb liquidity in Europe’s exchange-traded gas markets, the bloc’s financial and energy market regulators said. EU countries agreed in December to a gas price cap that, from 15 February, will kick in if the benchmark Title Transfer Facility (TTF) gas hub prices spike – a long-debated policy designed to avoid the record-high prices Europe faced last year after Russia slashed gas deliveries. The European Securities and Markets Authority (ESMA) said that if gas prices edge towards the level that would trigger the cap, market participants are likely to change their behaviour to avoid triggering it, or preparing for it.

Portugal and Spain will formally ask the European Commission to extend the temporary Iberian cap on prices for natural gas and coal used by power plants, the Portuguese Environment Minister Duarte Cordeiro said. Spain’s Energy Minister Teresa Ribera said Spain would seek to extend the mechanism until at least the end of 2024. Portugal only applies the mechanism to gas prices as it no longer has coal-fired power plants.

The European Commission aims for EU countries to start jointly buying gas “well before summer”, European Commission Vice-President Maros Sefcovic said, an attempt to help countries refill storage and avoid a supply crunch next winter. Following a first meeting of EU country representatives to coordinate the planned purchases, Sefcovic said he had urged member states to swiftly engage with market players in their countries to estimate the volumes of gas they will jointly purchase. Sefcovic asked the industry to confirm if they are interested in joining the EU scheme to jointly buy gas, which the Commission hopes will help Europe refill depleted storage caverns and negotiate lower prices by using countries’ collective buying power. The Commission aims to publish the amount of gas European countries plan to jointly buy in early spring, to attract offers from suppliers. EU countries must ensure their local companies take part in the aggregation of gas demand with volumes equivalent to 15 percent of the gas needed to fill that country’s storage facilities to 90 percent of capacity. EU-wide, the 15 percent requirement amounts to around 13.5 billion cubic metres (bcm) of gas – a slither of the bloc’s total gas imports, which stood at 338 bcm in 2021, according to Eurostat data.

Germany can reasonably hope to fill up its gas storage facilities at favourable prices for next winter, Economy Minister Robert Habeck said but cautioned that the energy crisis in Europe’s biggest economy is not over yet. Habeck said the country has the infrastructure to import 14 billion cubic metres (bcm) per year after building three floating liquefied gas terminals since last year. But 30 bcm were still needed to compensate for the 55 bcm that were pumped from Russia each year through the Nord Stream 1 pipeline, he said.

Europe’s biggest gas grid operator Snam is expected to increase investments to boost its transport, storage and LNG businesses in the next four years, in a move to reinforce Italy’s energy security. The state-controlled group played a key role in filling Italian gas stocks last year when the country was preparing for the winter with dwindling Russian supplies. Analysts expect the company to ramp up investments to around €11 bn in the 2022-2026 period – from 8.1 bn in the previous plan – focusing on core business while reducing the emphasis on green hydrogen. Under the plan, Snam is expected to complete investments in two terminals for LNG and expand the country’s gas storage. Before 2022, when Russia provided nearly 40 percent of Italy’s gas consumption, fuel imports used to enter northern Italy and travel south.


French energy giant TotalEnergies CEO Patrick Pouyanne is expected to visit Mozambique, where a multi-billion-dollar gas project has been on hold since a 2021 jihadist attack. Mozambique has set high hopes for vast natural gas deposits — the largest found south of the Sahara — that were discovered in the Muslim-majority northern province in 2010. If all the deposits are tapped, Mozambique could become one of the world’s 10 biggest gas exporters, according to estimates. TotalEnergies halted its US$20 bn LNG project in 2021, after a deadly raid on the coastal town of Palma. In November, the first export shipment of LNG from the area left Mozambique for Europe. But the LNG was produced at Coral Sul, a floating facility managed by Italian company Eni.

Nigeria was the victim of “a campaign of bribery and deception” over a collapsed gas processing project, its lawyers told London’s High Court, as the country’s appeal against an US$11 bn damages bill got underway. A London arbitration tribunal in 2017 awarded US$6.6 bn in damages to Process & Industrial Developments (P&ID), a little-known British Virgin Islands-based company, for lost profits related to the failed project.

Middle East

The Abu Dhabi National Oil Company (ADNOC) is eyeing a valuation of at least US$50 bn for its gas business slated to float this quarter. The state oil giant announced in November it was combining its gas processing arm and its LNG subsidiary into a single listed entity. The company is sharpening its focus on the gas market as Europe seeks to replace all Russian energy imports as early as mid-2024 after gradual supply cuts since Western sanctions were imposed on the country over its invasion of Ukraine.

North and South America

Shell PLC’s LNG Canada export project in British Columbia plans to start building its proposed second phase with natural gas-powered turbines and switch to electricity as more renewable power becomes available, a decision that means the expansion project will initially generate high greenhouse gas emissions. LNG Canada, in which Japan’s Mitsubishi Corp owns a 15 percent stake and is set to be Canada’s first LNG export terminal. The first phase is expected to begin shipments around 2025. With global demand for natural gas from sources other than Russia accelerating after its invasion of Ukraine last year, LNG Canada is weighing whether to build by 2030 a second phase to double its annual capacity to 28 MT. LNG Canada plans to initially build Phase 2 with natural gas-powered turbines and switch to electric motors as more power becomes available, pending a final investment decision, CEO Jason Klein said. LNG Canada has previously described this approach as only one of the options it was considering.

Trinidad and Tobago plans an auction this quarter of up to 20 offshore natural gas exploration blocks under new fiscal terms designed to increase the pool of potential bidders. The Caribbean nation has been working to stem a decline in its natural gas output and to spur exploration in its shallow waters, where almost all of its natural gas is produced. The new fiscal terms and a plan to provide seismic data aim to lure new bidders. Minister of Energy and Energy Industries Stuart Young confirmed the bid round at a ceremony to close an onshore auction in which it received 16 bids on 11 blocks.

Top United States (US) gas exporter, Freeport LNG, is expected to further extend the seven-month-long outage of its LNG export plant in Texas to February, as it awaits regulatory approvals. Accounting for 20 percent of US LNG exports, the resumption of the facility is important to ease the squeeze of global LNG supplies, especially as Europe is rebuilding its gas storage after Russia cut gas exports following Moscow’s invasion of Ukraine. Freeport LNG said the restart timeline still stands and the company was still targeting the second half of this month for the safe, initial restart of its liquefaction facility, pending regulatory approvals.

Russia & the Far East

Russian energy giant Gazprom will ship 25.1 million cubic metres (mcm) of gas to Europe via Ukraine, it said, further reducing its supplies to the European Union. At the same time, data from Ukraine indicates a possible partial recovery in supplies. Russian gas exports to Europe via pipelines plummeted to a post-Soviet low in 2022 as deliveries to its largest customer plunged because of the conflict in Ukraine and suspected sabotage that damaged a major pipeline. Gazprom had already reduced flows to 32.6 mcm via the Sudzha metering point, down almost 8 percent from the previous several days. The company had shipped gas via Ukraine at between 35.4 mcm and 35.5 mcm over Jan. 6-16, having exported more than 40 mcm per day for most of the second half of last year and the first three days of 2023. Ukraine’s state gas transit company said that Russian gas nominations, or requests from customers, were seen at 35.2 mcm via the Sudzha metering point, signalling a possible partial recovery in supplies.


Prices of Asian spot LNG eased for a seventh consecutive week, falling to a near one-and-a-half year low, amid ample inventories in North Asia and Europe. The average LNG price for March delivery into Northeast Asia LNG-AS was at $18.50 per mmBtu, industry sources estimated, its lowest levels since August 2021. Amid easing spot prices, some energy companies in Asian emerging markets such as Thailand’s PTT as well as GAIL Ltd and Petronet from India began seeking cargo for delivery during February to April.

Myanmar’s military junta is selling Rakhine’s natural gas to China and it has sold over US$1.43 bn worth of it in 2022. Vast oil and gas profits continue flowing to and propping up Myanmar’s military junta since its bloody crackdown on nationwide resistance to the February 2021 coup, opposition and rights groups said. The Junta exported and sold billions worth of natural gas from Rakhine to China in 2022. The Myanmar-China natural gas pipeline is under the responsibility of South-East Asia Gas Pipeline Company Limited (SEAGP), while the crude oil pipeline is being managed by South-East Asia Crude Oil Pipeline Company (SEAOP). The gas pipeline, which was built at a cost of about US$1 bn, was said to be able to distribute and transport 12 bcm gas annually. The natural gas produced from Rakhine offshore is sent to China’s Yunnan State through the gas pipeline across Magway, Mandalay and Shan State. Myanmar is among the countries that export the most gas to China and is the third largest exporter of natural gas after Turkmenistan and Russia.

Indonesia plans to offer 10 oil and gas working areas this year, including a block in the South China Sea, amid efforts to boost energy production and make new discoveries, the energy ministry said. In 2022, Indonesia auctioned 13 oil and gas fields and appointed contractors for six of them. The country is aiming to reach crude oil lifting of 1 million barrels per day (bpd) and gas lifting of 12,000 million standard cubic feet per day (mmscfd) by 2030. Last year, it missed its oil and gas lifting target amid delays in projects and unexpected shutdowns. Among the oil and gas fields Indonesia plans to offer this year are working areas in Natuna D Alpha, which are giant gas fields situated in the South China Sea, the ministry said. Last year, Indonesia approved a development plan for the US$3 billion Natuna gas field in the South China Sea.

The Philippines’ Department of Energy said it has approved a US$67 mn LNG import terminal project, the country’s seventh such facility, as it gears up for the launch of its liquefied natural gas industry this year. The DOE said it has issued a notice to proceed to Samat LNG Corp, which plans to construct a small-scale LNG terminal in Mariveles municipality in Bataan province, about 60 kilometres (35.2 miles) north of the capital Manila. The Southeast Asian country will need to rely on LNG imports to fuel gas-fired power plants with a combined capacity of more than 3,000 megawatt (MW), as output from its Malampaya gas field in the South China Sea is expected to continue declining and be depleted by 2027. Aside from importing LNG for power generation and transport sectors, the Philippines is also ramping up efforts to discover new indigenous gas resources, as it seeks to phase out coal-fired power plants. Under its proposal, Samat LNG aims to begin commercial operation by the first half of 2024, with a capacity of 200,000-400,000 tonnes of LNG annually. It plans to supply gas to fuel small-scale power producers, manufacturing companies, and transport fleets.

Santos Ltd faces a new delay in developing the Barossa gas project off northern Australia after a regulator ordered it to evaluate environmental risks to underwater indigenous cultural heritage before starting pipeline construction. Pipeline construction for the US$3.6 bn gas project had been due to begin at the end of January, with the company aiming to start producing gas in the first half of 2025.

News Highlights: 8 – 14 February 2023

National: Oil

Russia price caps spur India’s interest in naphtha, fuel oil, but not diesel

14 February: More Indian firms are attracted to buying Russian naphtha as a low-cost feedstock for their refineries and petrochemical plants after price caps imposed by Western nations. Prices for refined products such as naphtha and fuel oil are capped at US$45 a barrel by the Group of Seven nations, the European Union, and Australia in a scheme aimed at curbing Moscow funding of its war against Ukraine. India’s interest in ramping up Russian oil products imports comes after the world’s third largest crude importer became Moscow’s top oil client after China as the West shunned supplies from Moscow. Cheap Russian crude has shaved costs at Indian refiners and boosted margins. Reliance Industries Ltd (RIL), the owner of the largest refining complex in the world, boosted its imports of Russian naphtha imports in February to about 222,000 tonnes, ship tracking data from Refinitiv showed. RIL began importing Russian naphtha in September and by the end of January had shipped in about 217,000 tonnes, the data showed. RIL, already India’s largest buyer of Russian naphtha and fuel oil, would consider increasing imports further. State-owned refiners Bharat Petroleum Corporation Ltd (BPCL) and Indian Oil Corporation (IOC), which have petrochemical facilities, are also looking for opportunities to buy Russian naphtha. Haldia Petrochemicals Ltd would also consider buying Russian naphtha if the quality and cost are suitable for its plants. However, Indian refiners are unlikely to purchase Russian diesel as import costs are high after adding US$10–US$15 per barrel in freight and insurance costs to the US$100 price cap for the fuel.

OIL signs pact with the state government for exploration in lower Assam areas

10 February: Exploration for crude oil and natural gas in the northern bank of Brahmaputra in Assam will commence soon with the state government entering into an agreement with Oil India Ltd (OIL). The Assam government signed petroleum exploration licence (PEL) deeds of two open acreage licensing policy (OALP) blocks with the PSU. It is for the first time that exploration for crude oil and natural gas will be done on the northern bank of Brahmaputra in the lower Assam region. OIL will invest around INR 120 mn in the projects, and will start the seismic survey this month itself.

LPG can be sold at more economical rates if the international price comes down

9 February: If the international price of fuel comes down from its current price of US$750 per metric tonne, domestic LPG (liquefied petroleum gas) can then be sold at “even more economical rates,” the Centre told Lok Sabha. Union Minister for Petroleum and Natural Gas Hardeep Singh Puri was replying to questions of the members who wanted to know why the cost of the domestic gas cylinders is not being reduced. He said the government is “sensitive” to the requirements of the consumers, particularly the most vulnerable.

India’s fuel demand slips in January from nine-month peak

8 February: India’s fuel demand slipped in January after hitting a nine-month peak in December, hit by lower mobility due to cold weather in parts of the country and a slowdown in industrial activity. Consumption of fuel, a proxy for oil demand, was about 4.6 percent lower than the previous month at 18.7 million tonnes (MT) in January, the oil ministry’s Petroleum Planning and Analysis Cell (PPAC) data showed. Sales of diesel fell 7.6 percent in January from a month ago to 7.18 MT, while sales of gasoline, or petrol, fell 5.3 percent to 2.82 MT, the PPAC data showed.

National: Gas

RIL seeks US$12.75 for CBM gas, ONGC wants US$9.35

13 February: Reliance Industries Ltd (RIL) and Oil and Natural Gas Corporation (ONGC) separately auction natural gas extracted from coal seams at prices linked to Brent crude oil prices. RIL is seeking a minimum US$12.75 per million British thermal units for coal bed methane (CBM) from a block in the Shahdol district of Madhya Pradesh, while ONGC wants US$9.35 for the same kind of fuel from North Karanpura in Jharkhand, according to tender documents. RIL has sought bids for sale of 0.65 million metric standard cubic metres per day (mmscmd) from CBM block SP(West)-CBM-2001/1 for one year beginning 1 April 2023, the document showed. ONGC has offered 0.015 mmscmd of gas from North Karanpura (NK) block in Jharkhand for 3 years.

GAIL signs advance pricing agreement with CBDT

10 February: GAIL (India) Ltd entered into a APA (advance pricing agreement) with the Central Board of Direct Taxes (CBDT) for determining the transfer pricing margin payable on its long-term LNG (liquefied natural gas) sourcing contract from the United States (US) for a period of five years. GAIL is the first public sector undertaking in the oil & gas sector in India to successfully sign the APA. GAIL (India) is depending on the US to secure a stable supply of LNG cargo. The company currently has two contracts to buy a combined 5.8 million tons per year of LNG from the US, comprising around 90 standard sized cargo. GAIL had been struggling to replace supply from a former trading arm of Gazprom, which has not delivered on scheduled shipments since May, 2022. Back in 2012, Gazprom’s former subsidiary, Gazprom Marketing and Trading Singapore (GMTS), had entered into a 20-year contract to supply GAIL with 2.85 million tonnes of LNG a year. Supplies under the deal had started in 2018 and the full volume was expected to be reached in 2023. Up to 55 percent of India’s local gas demand is met through imports. On the other hand, while gas meets only 6.2 percent of India’s energy needs, the Centre has been planning to raise this figure substantially, in order to reduce the dependence on petroleum. New Delhi is advocating for an aggressive gas purchase policy, and balancing sources of import, most of which have originated from Qatar in recent years. Qatar and the US — the two largest producers globally — currently supply India with LNG through multiple contracts. The Third largest producer Australia mostly supplies China.

Adani Total Gas Q3 profit rises on price hikes

9 February: Adani Total Gas reported a 17.2 percent rise in quarterly profit on price hikes and short-term contracts, and the company said it was evaluating an independent review following a US (United States) short-seller’s critical report on its businesses. The company has been hit by a market rout after US short-seller Hindenburg Research on Jan. 24 alleged it had engaged in stock manipulation and used tax havens. The company, which distributes piped gas in various Indian cities, said consolidated profit rose to INR 1.5 billion (US$18.18 million) in the quarter-ending 31 December, from INR 1.28 billion a year ago. Adani Total Gas said it sourced gas through bilateral trades and Indian Gas Exchange, helping the company better manage volatility in prices, it said. Short-term contracts helped in improving gas cost, it said.

National: Coal

Coal Minister asks CIL to remove bottlenecks to boost production

14 February: Minister of Coal and Parliamentary Affairs Pralhad Joshi urged coal companies to identify and remove production bottlenecks in order to further increase dry fuel production. He said this while conducting a meeting to review dry fuel production from allocated blocks. So far in this financial year, 92.3 million tonnes (MT) coal has been produced from 54 operational coal blocks. Coal offtake by CIL has also achieved 100 percent of the target, with a 5.5 percent growth over last year.

Adani offers coal cargo at discount in push for quick sales

9 February: Adani Group is offering shipments of coal at a discount, a sign the embattled conglomerate may be seeking to sell cargo quickly as its liquidity position comes under increased scrutiny. The group’s traders are offering to sell several coal shipments from Australia and Indonesia at discounts of about 4 percent relative to Asia’s price benchmarks.

National: Power

Financial year ending, but power tariff for Delhi yet to be announced

13 February: The power tariff order of Delhi for 2022-23 is yet to be announced by the city’s electricity regulator DERC, even as the financial year is coming to an end. Ideally, the exercise should be completed before the next financial year starts, and a delay in announcement in tariff will affect consumers as well as distribution companies in the long run “financially”, according to people who track the power sector. The power tariff order is ready but its announcement has been delayed due to various reasons, Delhi Electricity Regulatory Commission (DERC) said. The power ministry had in a letter in 2021 directed all state and central power regulators to issue tariff orders before 1 April of a financial year. It had also said the tariff order should be cost reflective.

Punjab discom to install prepaid smart electricity metres at government departments

9 February: Punjab State Power Corporation Limited (PSPCL) has decided to introduce prepaid smart metres for all its existing and new connections in the government departments. After these pre-paid metres are installed, the departments will have to make advance payment for their energy future consumption. The decision on government departments over prepaid metering systems, up to contract demand of 45 KVA, will start being implemented from 1 March. However, the PSPCL will serve these departments a 15 days’ notice, comprising details of last 12 months’ energy consumption and billed amount for respective consumers. PSPCL will procure and install pre-paid metres at its own cost and consumers are not required to pay any metre cost for the prepaid metering system. Government departments will have to make advance payment for connections with prepaid metres. They will have to make a proper accounting system for advance payments at their end. These departments will also appoint a nodal officer for each connection and convey mobile number and e-mail ID to be registered in the PSPCL database. There shall be a 1% rebate on the energy charges in case of prepaid metre connections, while the tariff for respective category connections shall be applicable. Sources in PSPCL said there were 53,000 connections with government departments that would be served 15-days’ notice. But, smart metering systems will not be imposed on government hospitals, water supply, and power connections related to medical and emergency services. Under the central government’s RDS Scheme, the state power utility is supposed to install pre-paid metres on 5 percent of its government power consumers by 31 March to avail the funds, whereas 100 percent departments will have to be covered till 31 March 2024.

National: Non-Fossil Fuels/ Climate Change Trends

Eye on green tourism, Goa starts planning a shift to renewable energy

14 February: Keen on taking its plans for green tourism forward, the state government has begun designing a road map for Goa’s transition to green energy. Among the objectives of the draft plan are the development of a green rating system and decarbonising programmes or schemes for tourism and allied sectors in the state. Goa’s 100 percent renewable energy plan entails a transit towards low-carbon pathways while maintaining the state’s development aspirations.

Skoda-VW India increases its solar rooftop capacity 

14 February: In line with Volkswagen Group’s global ‘goTOzero’ mission, Skoda India inaugurated an 18.5 megawatt (MW) solar-power rooftop at its Chakan plant in Pune, Maharashtra. Besides reducing its dependence on non-renewable energy, this move aims to help meet the Group’s global target of carbon neutrality at all its sites by 2030. With this augmentation in solar power, the Group’s Chakan facility claims to produce 26.6 million kWh of energy annually. India targets net zero emissions by 2070 and plans to meet 50 percent of its electricity requirements from renewable energy sources by 2030.

Punjab seeks Centre’s help for setting up 100 MW biomass power projects

14 February: Punjab New and Renewable Energy Sources Minister Aman Arora called on R K Singh, Union Minister of Power, New & Renewable Energy to seek Viability Gap Funding (VGF) to set up 100 MW Biomass Power projects in the state. He said that the proposed projects would consume one million tons of paddy straw per annum, and it will go a long way to save the environment by finding a sustainable solution to the agriculture residue burning menace. He requested Singh to consider the demand for providing INR50 mn per MW VGF for these 100 MW Biomass Power projects. He also sought financial assistance and technical support for setting up Biomass Solar Hybrid Power projects in the state.

Delhi to raise power generation capacity by 6 GW via renewable: Sisodia

9 February: The Delhi government will increase power generation capacity in the city by 6,000 megawatts (MW) in the next three years using renewable energy sources through various initiatives, Deputy Chief Minister Manish Sisodia said. The city government is working on a war footing to meet Delhi’s electricity demand using renewable energy, he said. He emphasised faster adoption of rooftop solar panels by Delhi government offices, schools and other buildings, as per the city’s new solar policy. The renewable sources are primarily solar energy and wind energy which contributes approximately 2,000 MW to Delhi’s power supply. The draft of the new solar policy of the Delhi government will encourage Delhiites to install solar panels on rooftops through a generation-based incentive (GBI) of INR 2-3 per unit of power for the residential sector and INR 1 for the commercial sector.

Himachal urges the centre to enhance state share in hydropower projects from 12 to 15 percent

9 February: The Himachal Pradesh government urged the Centre to enhance the state’s share of hydropower projects from 12 to 15 percent. Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu in a meeting with Union Minister of Power, New and Renewable Energy, RK Singh urged to enhance the state’s share in the power projects which were commissioned 25 years back having completed their loan repayments. Singh was apprised that around 12,000 MW of hydropower potential in the state was yet to be harnessed. Besides, the state also has ample scope for setting up solar projects, Sukhu said.

Centre grants INR 164 bn for five solar parks in Andhra Pradesh

8 February: The Union government has sanctioned five solar parks at an estimated cost of INR 164 bn for the state with an approved capacity to generate 4,100 megawatts (MW) of power, Union minister of power and renewable energy R K Singh said. While Kurnool and Kadapa will get one solar park each, three parks would be in the Anantapur district, including a solar and wind park at Ramagiri. The solar park scheme has been extended up to March 2024 for completion, he said.

Pollution in the national capital has gone down significantly: Delhi Government

8 February: Several steps taken by the Kejriwal government to curb pollution in the national capital seem to have borne fruit and pollution levels have gone down significantly, Delhi Environment Minister Gopal Rai said. Air Quality Index from 0 to 100 is considered as good, while from 100 to 200 it is moderate, from 200 to 300 it is poor, and from 300 to 400 it is said to be very poor and from 400 to 500 or above it is considered as severe. Rai said that the increase in the sale of electric vehicles in the national capital has contributed towards the reduction of pollution in the capital. Just before the set-in of the winter in the national capital, Chief Minister Arvind Kejriwalannounced a 15-point program, which included controlling the pollution from stubble burning to pollution from vehicles. To keep a track of the air pollution in Delhi, Kejriwal has recently launched a supersite with “state-of-the-art” air analyzers and a mobile air quality monitoring system for a real-time “source apportionment study” to identify the sources of air pollution in the capital.

International: Oil

Guyana to complete new oil contract model by Q2 as auction looms

14 February: Guyana expects to finalise a new oil production-sharing agreement model on time for an auction that will collect bids through mid-April, Vice President Bharrat Jagdeo said. The South American country has emerged as one of the hottest offshore areas in decades with as much as 25 billion barrels of oil and gas. The country for months has promised to deliver new contract terms, but has been repeatedly delayed. Oil ministers and executives are in Guyana to learn more about the 14 oil and gas exploration blocks on offer. The country is also considering allocating extra blocks to countries including Brazil, Qatar and India through bilateral agreements, he said.

Russian oil sold for significantly more than quoted prices: Goldman

13 February: Moscow’s trade partners have increasingly paid more for Russian crude than quoted prices suggest, Goldman Sachs said in a note, cushioning Russia from the impact of Western sanctions. The bank in a note estimated that the gap between the average effective price paid and the quoted price has widened since last March, and reached around US$25 per barrel in December. In response to the latest Western sanctions, including price caps designed to limit Moscow’s revenues, Russia said it would cut oil production by 500,000 barrels per day (bpd), in March this year. International Brent crude spiked to levels close to all-time highs following Russia’s invasion of Ukraine nearly a year ago, but later eased and Russia’s benchmark Urals blend has traded at deep discounts as European buyers have shunned it. Russia’s State Duma introduced a bill setting discounts for Russian oil exports, which typically trade at a discount to dated Brent. Goldman Sachs lowered its oil price forecasts for this year and next but said it still expects prices by December to rise gradually to US$100 a barrel.

International: Gas

China’s CNPC set to seal mega Qatari LNG deal 

13 February: China National Petroleum Corp (CNPC) is close to finalising a deal to buy liquefied natural gas (LNG) from QatarEnergy over nearly 30 years from the Middle Eastern exporter’s massive North Field expansion project. If sealed, this would be the second such deal between major LNG exporter Qatar and the world’s no.2 LNG buyer, as Beijing looks to beef up its gas supply and diversify its sources in a drive to replace coal and cut carbon emissions. CNPC’s talks follow a deal announced last November by China’s Sinopec, in which QatarEnergy agreed to supply 4 million tonnes of LNG annually for 27 years, the longest duration LNG supply contract ever signed by Qatar.

Germany is in advanced talks with Oman for natural gas supplies

9 February: Germany and Oman are in advanced talks to sign a long-term deal for liquefied natural gas (LNG) lasting at least 10 years as Berlin continues its search for alternatives to Russian fuel supplies. Europe has been scrambling to replace Russian gas since last year against a backdrop of war in Ukraine, with state-run Gazprom progressively reducing and then suspending the lion’s share of pipeline supplies to Europe. Energy firm RWE in September secured an LNG deal with UAE’s ADNOC, and Germany has been looking elsewhere through utility companies Uniper and Sefe, both of which were nationalised by Berlin last year. The deal with Oman would be for between 0.5-1 million tonnes per annum (mtpa), with one specifying around 0.8 mtpa over 10 years.

As natural gas prices tumble, new worries for US shale patch

9 February: A 46 percent drop in natural gas prices this year is rippling across the US (United States) shale patch, threatening to slow drilling and chill deal-making in a move unthinkable six months ago as global demand soared. Such moves were unfathomable six months ago as Russia reduced its gas flows to Europe and US gas became a hot commodity. The number of active gas-drilling rigs jumped about 48 percent to 157 in the first six months of 2022, according to oilfield services firm Baker Hughes data. Analysts expect gas drilling rigs to fall beginning this month. Two services firms – Liberty Energy and Helmerich & Payne – recently warned they may need to relocate equipment as operators pull back in grassy areas. US gas futures were trading on Wednesday at US$2.42 per million metric British thermal units (mmBtu) amid warmer weather and a prolonged LNG (liquefied natural gas) export plant outage, down from over $9 per mmBtu in August 2022.

International: Coal

First Australian coal cargoes arrive in China and awaits customs clearance

9 February: At least two vessels carrying Australian coal have arrived in China for the first time since an unofficial ban on imports was introduced more than two years ago, and several more are on the way, ship tracking data showed. The cargo is being closely monitored by coal traders as they are keen to see how smooth Chinese customs procedures will be. China, in a partial easing of the import ban, granted permission to just four central-government-owned firms to bring in Australian coal. The coal could be sent to Guoneng Taishan utility, owned by China Energy Investment Corp, data showed. Coal importers can discharge their cargo at ports first and then apply for customs clearance. But a growing coal inventory at Chinese ports, especially those in the north, is leaving limited space for new supplies, meaning buyers face a growing risk of demurrage if the customs process is drawn out. Coal stocks at major ports in northern China reached 34.65 million tonnes (MT), the highest level in six months, China Coal Transportation and Distribution Association data showed.

International: Power

Asia set to use half of the world’s electricity by 2025: IEA

8 February: Asia will for the first time use half of the world’s electricity by 2025, even as Africa continues to consume far less than its share of the global population, according to the International Energy Agency (IEA). Much of Asia’s electricity use will be in China, a nation of 1.4 billion people whose share of global consumption will rise from a quarter in 2015 to a third by the middle of this decade, the IEA said.

International: Non-Fossil Fuels/ Climate Change Trends

Denmark’s CIP keen to sink $8.6 bln in Portugal’s offshore wind power

9 February: Renewable energy developer and fund manager Copenhagen Infrastructure Partners (CIP) intends to invest €8 billion (US$8.6 billion) in a large offshore wind power park in Portugal that is preparing its first auction of such concessions. CIP said it aimed to create an installed capacity of 2 gigawatts (GW) in a project called Nortada off central Portugal’s Atlantic coast, which would amount to 20 percent of the country’s 2030 target for offshore wind power. CIP said it has more than 50 GW of offshore wind projects in its portfolio, in Europe and the United States (US). Portugal aims to generate 80 percent of its annual electricity usage from renewable sources by 2026, up from around 60 percent in 2022, which was already one of the highest ratios in Europe.

Myanmar, Russia sign pact on developing nuclear power

8 February: Myanmar’s military-led government, working with Russia’s state atomic energy company, has inaugurated a nuclear power information centre as a step toward developing atomic power to fill energy shortages in the strife-torn Southeast Asian nation. Russia has been promoting cooperation on nuclear power with several Southeast Asian nations including Vietnam, Indonesia and the Philippines.

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 2022 is the nineteenth 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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