GAIL May Scrap Tender for Hiring LNG Vessels
State-run gas marketer GAIL India will likely scrap the tender for hiring liquefied natural gas (LNG) ships after failing to negotiate acceptable terms with bidders in what would hurt India’s ambition to build high-tech LNG carriers at home under the ‘Make in India’ programme. GAIL had issued a tender last September seeking to charter at least nine LNG vessels to bring home from the US up to 5.8 million tonne of gas annually from early 2018. Successful bidders were supposed to locally build a third of all ships they make under the Make in India plan. GAIL received bids from two Japanese consortiums after the deadlines for submissions were extended more than once. The bids, however, were not fully aligned with the tender and contained several conditions, which the GAIL executives hoped to resolve in negotiations that lasted more than five months with the bidders. GAIL and the Japanese consortiums have now ended their negotiations after failing to reach a common ground, sources with direct knowledge of the matter said. In the next few days, the board of GAIL will likely consider the proposal to scrap the current tender for LNG carriers and issue a new one to hire ships without any condition on building some ships locally, sources said. The bidders wanted the Indian government to share some of the risks they saw in investing billions of dollars in making LNG carriers. They sought some form of guarantee that would help compensate them if gas supply from America were to shrink during the contract period, sources said. Bidders were a little averse to sinking money in building ships at Indian shipyards as it would cost almost triple the amount at a Korean shipyard and therefore also demanded higher equity contribution from the Indian government for these ships, sources said. GAIL declined to comment for the story. GAIL is now running out of time to hire ships as the supplies of its contracted gas from the US will start flowing in a little more than a year. A GAIL executive said hiring LNG ships in time wouldn’t be difficult if we were to lift the Make in India condition. Early last year, GAIL had scrapped a previous tender seeking LNG carriers after receiving no response from foreign bidders reluctant to transfer technology and build ships in India. Indian shipyards don’t have LNG carrier building technology. A diplomatic push finally got some interest from the Korean shipbuilders, who agreed to tie-up with local shipyards to build LNG carriers in India. The bidders for GAIL ships had to tie-up with shipbuilders who would in turn partner local shipyards. Vessels from foreign shipyards had to be delivered between January and May 2019 and from Indian shipyards between July 2022 and June 2023. An LNG vessel on average costs about $200 million. The Japanese consortium of Mitsui OSK Lines Ltd, Nippon Yusen Kabushiki Kaisha Ltd and Mitsui & Co Ltd had bid to supply six vessels while the other group of Mitsubishi Corporation, Kawasaki Kisen Kaisha Ltd, GasLog Ltd and Foresight Oil Ltd had bid for four ships. Both consortiums had partnered with Cochin Shipyard to meet the local manufacturing condition. Two other Korean ship makers – Hyundai and Daewoo – too were earlier keen on participating in the process but dropped off after local partners L&T and Pipavav shipyards respectively pulled out. Ed Dickson Jersey
U.S. rig count drops amid concern global glut will persist
The number of rigs exploring for oil and natural gas in the U.S. decreased by two last week as a major forecast indicated the downturn that started two years ago could continue well into 2017. Across the U.S., 506 rigs were active for the week ending Friday, down 40 percent compared to the 842 operating a year ago, according to Houston-based oilfield-services company Baker Hughes Inc. Of last week’s total, 416 rigs sought oil, which was up by two from the week before. The number of oil rigs in operation has risen 11 of the past 12 weeks, the longest streak since early 2014. Rigs drilling for gas dropped by three to 89 last week. One rig was listed as miscellaneous. The U.S. rig count peaked at 4,530 in 1981 and hit its lowest level in May at 404. The Gulf of Mexico rig count, which has the greatest impact on Houma-Thibodaux’s oil-based economy, rose by two to 20 this week. It’s down by nine rigs, 31 percent, from a year ago, according to the Louisiana Department of Natural Resources. Louisiana’s rig count, on land and offshore, dropped by two to 41, down 41 percent from a year ago. Crude oil prices, meanwhile, dropped last week amid concern that the glut that has persisted for more than two years will continue. West Texas Intermediate crude, the U.S. benchmark, closed Friday at $43.03 a barrel, down 2 percent for the day and 6 percent for the week. Brent, the world benchmark, closed at $45.87, down 1.6 percent for the day and nearly 5 percent for the week. Prices are at less than half their levels from two years ago. Terrebonne and Lafourche residents have watched the numbers as a downturn in the oil and gas industry, the area’s main economic engine, continues to take a toll. In the past two-and-a-half years, Houma-Thibodaux’s unemployment rate has risen from the nation’s lowest, 2.8 percent, to its current 7.2 percent. The local jobless rate has fallen to 352nd among 387 nationwide, according to the U.S. Bureau of Labor Statistics. Including ties, only 31 metro areas have higher unemployment rates than Houma-Thibodaux, which has lost more than 7,000 jobs in two years. Oil and natural gas companies have cut more than 350,000 jobs since crude prices started to fall in 2014, reports show. A global supply glut, fueled in part by a U.S. shale boom, is expected to keep prices from rising significantly. Last week, the International Energy Agency downgraded its previous predictions and forecast the oil glut will continue well into 2017, citing increased production in the Middle East and lower demand from China, India and Europe. “When will the world oil market return to balance? That is the big question today,” the agency said in its monthly forecast. “With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening. Demand growth is slowing and supply is rising.” Mark Barron Womens Jersey
GAIL pipeline project: HC directs TN to file status report
The Madras High Court has directed the Tamil Nadu government to file a status report on the stipulation of guideline and market value as on January 1, 2016 for determining the compensation amount for lands acquired for a gas pipeline project of Gas Authority of India Limited (GAIL) as directed by the Supreme Court. A bench, comprising Chief Justice Sanjay Kishan Kaul and Justice R Mahadevan, gave the direction yesterday on a PIL filed by one G Mutharasi, seeking implementation of the project, which had met with a stiff opposition from the farmers. When the matter came up for hearing, GAIL’s counsel submitted the February 2 Supreme Court order, allowing the state government to stipulate the circle rates or guideline value and the market value to determine the compensation amount for the land acquired. The litigation over acquisition of land by GAIL for the project between Kochi-Kootanad-Mangaluru-Bengaluru went up to the apex court as farmers were against acquisition of their land. The Supreme Court, while upholding the project, had confirmed that the land owners were entitled to an additional 30 per cent of the amount determined towards compensation. GAIL submitted that the state government had not specified the rates even after the apex court’s order. The Government Pleader (GP) sought time to place the status report. The petitioner submitted that natural gas was the cheapest fuel to produce electricity and the power supply position in Tamil Nadu would deteriorate if the project was not implemented. He prayed for a direction to implement the project. Jarrett Allen Womens Jersey
Can India Become An LNG Juggernaut?
In the world of liquefied natural gas (LNG), no market is watched with more interest or more potential excitement than India. In 2015 the country with the second-largest population on earth imported 15 million tons of LNG, but some forecasters predict it will import nearly 50 million by 2030. LNG faces a critical juncture, with some 40-50 million tons reckoned to be “homeless” by 2020 unless new contracts are signed; this has placed buyers like India and Japan in privileged positions, with the leverage to re-negotiate existing LNG contracts (which are generally signed for long-term, fixed amounts) and take advantage of a global glut to make short-term and spot price buys, minimizing divergence with market prices. India, currently the world’s fourth largest LNG importer, may turn into an LNG juggernaut, taking in the new production from Australia, the U.S., Iran and elsewhere. It has announced plans to increase re-gasification capacity to 55 million metric tons in order to feed demand. But the key question remains: is that demand reliable? Indian Oil, the state-run refining company, has announced that it expects to earn 15 percent of its total revenue from gas-related projects by 2021. At the moment, gas trading contributes only 5 percent to the company’s bottom line, and India overall relies on gas for 6.5 percent of its energy needs, lagging behind the global average of 23.8 percent. India Oil is set to invest $27 billion in oil and natural gas inside India, including a planned “mega refinery” in partnership with foreign capital. The company has reportedly secured 13 million tons of LNG regasification capacity across terminals in India, and has retained a commitment to importing two cargos of LNG from the Dahej import terminal every month. The terminal is run by Petronet, the country’s single largest LNG importer, which has been exploiting low prices to feed a “buying binge:” it’s expanding Dahej’s capacity from 10 million cubic meters a year to 15 million and is constructing a brand new terminal in the Indian province of Gangavaram on the East coast. These projects come with a high price tag, but Petronet can apparently afford it: the company reported a 55 percent increase in net profit for the first quarter (ending June), though the increase amounts to total net profits of $56 million, chump change for energy majors. The commercial ambition of India’s energy companies is matched by that of India’s government, which wants natural gas to account for 15 percent of overall energy use, an official said on September 6. Greater imports are needed to make up for India’s stagnant natural gas production. In 2015 the country’s production fell by 5 percent, while it’s per capita average (39 cubic meters) lags far behind the world average (369 cubic meters). There remains a vast number of Indians, estimated at some 280 million, who do not have access to reliable sources of electricity. Increased interest in imports is matched by a desire to grow domestic production: India is currently holding bid rounds for 67 new fields. There are also plans for a domestic natural gas hub, so that domestic prices can be traded more efficiently. India is superbly placed to take advantage of a growing ocean of LNG that is building worldwide. Qatar, long the world’s leader in LNG exports, re-negotiated its long-term contract with Indian importers through RasGas last December and remains India’s major LNG supplier. Indeed, it was the RasGas deal which sent Indian LNG prices falling earlier this year. But Qatar’s position is being challenged by Iran and Australia, which are each particularly well-positioned to feed India’s LNG demand. Energy diplomacy during 2016 has brought Iran and India closer together, with India recently expressing interest in constructing a terminal in Iran for facilitating exports back to India. Iran’s LNG output has not yet reached its potential, but expectations that it could compete with Qatar are running high. Australia has already built a significant LNG infrastructure and is ready to export. Massive projects like Chevron’s Gorgon facility are finally in a position to begin exporting large quantities of LNG. Japan’s Tokyo Gas Co. recently accepted its first cargo from Gorgon, a further sign that the facility’s much-publicized woes may finally be at an end. Other ailing LNG projects are benefiting from more capital, a sign that whatever the current market conditions, Australian commitment to LNG production remains strong. Global conditions point to thriving small-scale LNG production, even as high-profile mega projects like Gorgon struggle. Like other countries worldwide, India’s natural gas ambitions are one part economic, one part political. India has committed itself to bringing down its greenhouse gas emissions. Coal accounts for 61 percent of its total energy use, and like China, India has shown an interest in moving away from coal as an energy source. Global commitment to reducing greenhouse gases are helping to feed demand for cleaner natural gas, but the transition from dirtier fuel sources has been slow, while competition from renewable energy sources has been tougher than expected. India is trying to accelerate the transition by feeding natural gas to power plants, including nine in the southern part of the country, while the government is trying to encourage shipping to adopt natural gas as a new fuel source. But challenges lie in the way of India’s LNG ambitions. In the summer, the big story was India snapping up LNG adrift on the European market, for want of a buyer. The price was plummeting, a glut was exceeding demand, and India was well positioned to feed growing domestic demand. Imports from March to May soared, only to stagnate in July. Total imports this year are more than 20 percent higher than last year, but that may be a product of low prices rather than actualized demand: importers are taking advantage of favorable market conditions to snatch up LNG while they can. Despite government interest in LNG as a new, clean energy source, there has been a commitment within the government of prime minister Narendra Modi
To reduce emissions, Govt may exempt LNG from import duty
Addressing a meeting in Bengaluru, he said that in addition to building new gas pipelines, India would also increase its gas regasification capacity from 21 mmt to 55 mmt and this increased capacity of 34 mmt would enable the country to push more gas in the market. On gas economics, he commented that the Government would be willing to consider exempting LNG from import duty like crude oil, given that gas is a clean and environment-friendly fuel and without a doubt will help reduce emissions. The minister referred the KG basin, which is a major gas reserve, as the “North Sea for India”. He also spoke about the Gujarat case where the gas share of 26 per cent is higher than the world share of 24 per cent, and referred to the Government’s aspiration to replicate this across India. In his address at the workshop attended by CEOs and senior leaders from the oil & gas industry covering the entire gas value chain, the minister touched on several issues including Climate Change, gas infrastructure and pipelines, domestic gas supply, gas economics and innovative technology to boost the gas share in India’s energy mix. Pradhan stated that Bengaluru is a city where everything starts, and that Bengaluru is a good starting place for creating new gas markets. He began his address on the climate note, observing that India is not the world’s most polluting country. He highlighted that India has committed to carbon emission reduction in the COP21 summit and that gas will play a key role in India’s drive to combat climate change. On augmenting gas distribution, GAIL has approximately 15,000 km pipelines laid out for gas transport and plans to build another 15,000km gas pipelines, Pradhan noted. In his address to the technology companies, the minister mentioned the technological innovations, and new mechanisms for India, for example Caterpillar developing an economical technology to replace currently used diesel by gas in DG sets. He also stressed that developing India-specific models like Bio CNG, waste to gas, Syn gas from coal etc are the other areas to be looked for innovative economic solutions. Pradhan also mentioned that there will be enough market to absorb new volumes of gas in India in the form of new anchor customers like 100 new smart cities rather than only relying on the traditional anchor segments like power and fertilisers. Further, urban areas are fast expanding and developing a market for gas, replacing LPG and will help enable channel LPG in rural areas where women use animal waste and fire wood for cooking, which is a big health hazard. He asked the participants at the workshop to prepare an actionable plan and stressed on implementation and hitting the market rather than an intellectual discussion only or a societal debate. He also advised the group that a successful implementation strategy is one where all parties are aligned and on board and, hence, it is important to convince all stakeholders across the gas value chain. Earlier, UK Deputy High Commissioner Dominic McAllister complimented the Indian Government on the amazing economic pace and significant policy and regulatory reforms it has achieved. PTI adds from Guwahati: Assam Chief Minister Sarbananda Sonowal on Saturday urged Petroleum Minister Dharmendra Pradhan for sustained and uninterrupted gas supply to small tea growers. Sonowal, in a telephone discussion with Pradhan, sought to ensure uninterrupted gas supply to tea gardens and soon start the construction work of a super speciality hospital in Sivasagar, proposed by the ONGC. Pradhan assured all cooperation in supplying gas to small tea growers and assured that construction work of the hospital in Sivasagar would soon be started, the Chief Minister said on Saturday. Matt Stajan Jersey
OVL seeks oil in lieu of $537 million due from Venezuela
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), is seeking $537 million worth of crude oil in lieu of cash due for its share of sales from a Venezuelan oilfield. OVL owns 40 per cent of the San Cristobal field and had invested about $190 million in the project in 2008. State-run Petroleos de Venezuela SA, or PDVSA, holds the remaining stake. “We have not been paid for our share of oil from the field for last few years,” a company official said. San Cristobal project covers an area of 160.18 square kilometres in the Zuata Subdivision of proliferous Orinoco Heavy Oil belt in Venezuela. The field currently produces about 28,000 barrels a day, down from a peak of 38,000 bpd. The official said OVL had received its dividend from sale of crude oil produced from the field totalling $56.224 million for 2008. But dividends for 2009 to 2013, totalling $537.631 million, remained unpaid due to cash flow difficulties being faced by PDVSA. During 2015-16, OVL’s share of crude oil production was 0.585 million tons as compared to 0.645 million tons during the previous fiscal. It’s share of investment in the project was Rs 25.9971 billion ($486.69 million) till March 31, 2016. Since PdVSA is facing a cash crunch, OVL wants its share of revenue from the field be paid in form of crude oil. “We want to be given physical oil which we can sell in international market to recover our dues,” he said. Venezuela, the cash-strapped OPEC member and holder of the world’s biggest oil reserves, has been unable to pay foreign partners on some of its projects as revenues slumped along with crude prices and as funds were diverted to social programs and fuel subsidies. The Latin American nation earns almost all of its export revenue from oil. It is already repaying loans outstanding to China with crude and OVL is keen a similar deal. Oil Minister Dharmendra Pradhan had discussed the past dues with visiting Venezuelan Foreign Minister Delcy Rodriguez and Oil Minister Eulogio del Pino last month. Another option was to deduct the outstanding from the money Indian firms like Reliance Industries and Essar Oil pay to import crude oil from Venezuela. But since all of the revenue from oil sales is budgeted by Venezuelan government, that option is ruled out, the official said. Venezuela is India’s fourth largest source of crude oil, supplying some 23.6 million tons or 12 per cent of the country’s annual import in 2015-16. OVL, along with Indian Oil Corp (IOC) and Oil India Ltd, also holds 18 per cent stake in Venezuela’s Carabobo-1 project, which currently produces about 16,000 bpd of oil and is expected to reach 90,000 bpd by end of 2017. Calle Rosen Authentic Jersey