Cyprus, Israel seek gas-sharing formula to unlock East Med energy hub
An ownership squabble over Cyprus’ main natural gas field is threatening to delay multi-billion dollar plans to turn the eastern Mediterranean into a major energy hub. Israeli Prime Minister Benjamin Netanyahu and Energy Minister Yuval Steinitz are flying to Cyprus on Tuesday to spur plans to join the two countries’ electricity grids and construct a pipeline to link newly found gas fields to mainland Europe. Standing in the way, however, is a dispute over Aphrodite, a gas field discovered in 2011 at the edge of Cyprus’ economic waters. One tip of it stretches across the border into Israel’s maritime zone. At stake is 7-10 billion cubic metres of gas worth close to $1.5 billion, according to one recent estimate in Israel. That is less than 10 percent of Aphrodite’s total reserves and a fraction of the gas already discovered in Israel. Israel says it will not give up on the gas and the companies operating on the Israeli side are ready for legal action in case Aphrodite is developed without them. “I assume we will find a solution in good spirit so we can keep cooperating on bigger, more important, things,” Steinitz told Reuters. Several large gas fields have been discovered in the region over the past decade and Israel and Cyprus have grown close while collaborating in their development. Steinitz says he and his Cypriot counterpart, Yiorgos Lakkotrypis, have become good friends. But that does not guarantee a quick solution. “The government of Israel cannot give up, not even as a gesture of friendship, on its territories or its natural resources,” Steinitz said. He said the governments have asked the companies to reach an understanding among themselves on how much gas is on each side. “If they don’t reach an understanding, then we will ask a professional arbiter or a professional group … to examine the findings from both sides and decide on the proper division,” he said. The Cypriot Energy Ministry declined to comment, but officials in Nicosia said Lakkotrypis has suggested a similar course of action. Steinitz said during his visit that the countries may agree on a general format to solve the issue, but a final agreement could take weeks or months. Charles Ellinas, CEO of energy consultancy e-CNHC, said this should not be a deal breaker. “If the two governments between them agree to abide by the findings of the arbitration then it takes the heat out of it. And that’s what they need to do at this meeting this week,” he said. IT’S ALL CONNECTED Aphrodite is smaller than two huge gas fields, Tamar and Leviathan, discovered in Israel around the same time, but it was a milestone for Cyprus. Developing it are Royal Dutch Shell, Texas-based Noble Energy and Israel’s Delek Drilling. They are looking to sell the gas domestically and abroad, with a focus on Egypt, where Shell has a liquefaction plant. The field is also meant to be a link in the 2,000 km pipeline being planned by IGI Poseidon, a joint venture between Greece’s natural gas firm DEPA and Italian energy group Edison, to carry Israeli and Cypriot gas to western Greece. A final investment decision on the pipeline, with an expected price tag of up to 6 billion euros ($7.2 billion), could come next year. Deep-sea exploration in both countries continues and many current and future discoveries will likely be connected to each other to cut costs on infrastructure. The Aphrodite partners would not comment on the dispute, though a footnote in Delek’s 2017 financial report stated that “the vast majority” of gas was in Cyprus and a “minority” was in the adjacent Yishai prospect on the Israeli side. The Yishai consortium, which includes energy firm Israel Opportunity and Nammax Oil and Gas, a company linked to billionaire Beny Steinmetz, has already spent $120 million on exploratory drilling. The group commissioned a third-party assessment that concluded Yishai’s estimated 7-10 bcm of gas could be worth close to $1.5 billion. Production will have to happen in Cyprus since that is where most of the gas lies, said Rony Halman, chairman of Israel Opportunity, but he envisions the Yishai group being like “smaller partners for Aphrodite, but we will be part of the system”. They are prepared to bring a legal challenge in Europe in case of any opposition. “We as a company will bring a commercial claim that will stop the development. We have already sat with lawyers in London. We retained lawyers for this issue,” Halman said. “We are not willing to give up on this.” Jesse James Jersey
Shell trading arm protests proposed program for Marketlink oil pipeline
Shell’s U.S. trading arm on Monday urged regulators to deny a new program proposed by TransCanada Corp for its Marketlink oil pipeline from Cushing, Oklahoma, to Gulf Coast markets, saying it violates sections of the Interstate Commerce Act (ICA): Shell Trading (US) Company (STUSCO), a shipper on Marketlink, said the proposed “”flexible short-term program” is also inconsistent with the FERC-approved rate structure. FERC’s rate structure provides that walk-up shippers pay a higher rate for the same type of flexibility being offered to the flexible short-term shippers, STUSCO said. TransCanada in April filed for the program, effective June 1. Tre Madden Jersey
India to launch ninth round of bidding for City Gas Distribution today
India will formally launch the ninth round of bidding for City Gas Distribution today. Oil minister Dharmendra Pradhan will kickstart the round for which the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has invited bids for 86 Geographical Areas spread across 174 districts in 22 states and Union Territories. The GAs cover 24 per cent of the country’s area and 29 per cent of its population, Pradhan said in a tweet today, ahead of the Delhi roadshow. The latest round of CGD bidding assumes importance as the regulator has introduced new guidelines and framework superseding the earlier 2008 regulation, in an attempt to attract serious investor interest. The last day for submitting the bids for the ninth round ends on 10 July. Multiple rounds of bidding for CGD areas have attracted less than expected response from companies in the past. The sixth round held in 2015 included 34 Geographical Areas, of which only 20 areas received bids while the seventh round for setting up CGD infrastructure in 11 smart cities under smart city mission received only 1 bid. The eight round was a success as compared to previous rounds and almost all the players have been awarded CGD licences under it, according to PNGRB Chairman D K Sarraf. The new guidelines have revamped the bidding criteria with maximum weightage of 50 per cent for number of piped gas connections proposed in eight years from the date of authorization, as compared to 30 per cent earlier. The number of natural gas stations proposed to be installed has been assigned 20 per cent weightage; pipeline length 10 per cent; and the tariff proposed for city gas and Compressed Natural Gas (CNG) have 10 per cent weightage each. “The amended regulation has addressed most of the concerns of the sector. The bidding criteria has been revised such that 80 per cent weightage, as compared to 0 per cent earlier, is assigned to infrastructure creation so that gas network penetration is maximised while at the same time, participation of more players is incentivised with the extension of marketing exclusivity period for authorized entities to eight years as compared to five years earlier,” said K Ravichandran, Senior Vice President at ICRA. He added the change should push the bidding entities to commit the highest resources to reach the largest number of consumers, which has been a key thrust area of the government. The amended regulation has a provision for pre-determined penalty to be levied on players within three months from the end of each contract year, if the physical performance target provided by the player is not achieved at the end of the contract year. The regulator will impose a penalty of Rs 750 for shortfall in each piped gas connection, Rs 1.5 lakh for missing each inch-kilometer of pipeline, and Rs 20 lakh for each natural gas station not installed. Also, the new rules have placed a tariff floor of Rs 30 for city gas and Rs 2 per Kg for CNG in order to deter bidders from quoting unviable tariff of 1 paise per unit. The new guidelines have also provided for natural gas stations where a bidder can dispense natural gas in the liquefied form providing impetus to Petronet’s plan to construct 20 LNG stations on the west-coast of India. Matt Prater Jersey
SoCalGas lifts estimated cost of Aliso Canyon natgas leak to $954 mln
Southern California Gas Co (SoCalGas) boosted its estimated cost for the massive leak at its Aliso Canyon natural gas storage facility between October 2015 and February 2016 to around $954 million, up 4.4 percent from the estimate of $913 million last quarter, according to a quarterly report with U.S. financial regulators. SoCalGas, a unit of California energy company Sempra Energy , warned the “estimate may rise significantly” due to pending lawsuits, possible fines and other costs. It said costs not covered by insurance or delays in receiving insurance payments “could have a material adverse effect on SoCalGas’s and Sempra Energy’s cash flows, financial condition and results of operations.” The utility said the latest estimate included $928 million of costs already recovered or likely to be recovered from insurance. It said about 60 percent of the total cost was for temporary relocation of residents who live near the facility, which is close to the Porter Ranch neighborhood in Los Angeles, including cleanup costs. Aliso Canyon, with a capacity of 86 billion cubic feet (bcf), is SoCalGas’ biggest storage facility. State regulators estimated 4.62 bcf of gas leaked at Aliso Canyon. One billion cubic feet is enough gas to supply about five million U.S. homes for a day. The facility represents 63 percent of the utility’s gas storage capacity, making it a key part of the company’s ability to deliver fuel to customers, especially on the coldest days when demand for heating is highest and the hottest days when a lot of gas is used to generate power for air conditioning. State regulators have limited the amount of gas SoCalGas can inject into Aliso Canyon to a total of 24.6 bcf. They have also said the company can only withdraw gas from the facility when other options are not available to meet demand. Many residents and government officials want SoCalGas to shut the Aliso Canyon facility. Elfrid Payton Womens Jersey
Global energy companies get drilling on booming gas demand in Asia
With global natural gas prices on the rise, international oil and gas exploration companies have rolled up their sleeves, aiming to drill deeper to get more gas and capitalize on the booming demand in Asia. More upstream final investment decisions are expected in 2018-2019. The number of project greenlights worldwide has more than doubled compared to 2015-2016, according to Wood Mackenzie, a leading energy research and consulting company. That matches the situation in Southeast Asia, where Thailand has resumed a long-delayed auction for the Erawan and Bongkot gas blocks in the Gulf of Thailand to secure the continuity of gas supply for the country’s power-generating sector. They are brownfield projects whose concessions are due to expire in 2022 and 2023, respectively. Sources at the Energy Ministry said at least three international oil and gas companies are expected to join the bidding: PTTEP, Chevron and Abu Dhabi sovereign wealth fund Mubadala Investment. Gas from the two fields provide a combined 2.1 billion standard cubic feet per day, or around 40% of total gas demand in Thailand. Chevron is the production operator of the Erawan block, while PTT Exploration and Production operates the Bongkot block. In Malaysia, the state energy company Petroliam Nasional Berhad (Petronas) is also slightly increasing capital expenditures for upstream activities in 2018 from last year, according to upstream CEO Mohd Anuar Taib. Petronas, like other oil majors, was hit hard by the plunge in oil prices from mid-2014 highs, but sharp cost cuts since then and a modest price recovery that began last year has helped the company boost profits so it can spend more. Petronas allocated 26 billion ringgit ($6.6 billion) for upstream expenditures in 2018, slightly up from 2017. However, the company did not give a precise comparison. This is still little more than half the 48.7 billion ringgit spent on upstream activities in 2015. The natural gas market is undergoing a fundamental transformation. Industry has overtaken the power sector as the driving force behind the growing use of gas, thanks to rising demand in China, developing Asia, the Middle East and the U.S., according to the International Energy Agency. The IEA’s forecast is in line with research by major international oil and gas companies, which have forecast that many countries, particularly in Asia, will shift toward gas-based economies, resulting in a rise in gas demand. In China, the National Development and Reform Commission, which guides national energy policy, announced on April 25 a goal of boosting reserves to the equivalent of 16% of domestic consumption in 2020, up from less than 6% today. The World Bank said in its April Commodity Markets Outlook that global natural gas prices will rise by 20% in 2018 and could continue uptrend during 2020-2025, rebounding from the sluggish period during 2015-2016, when demand dropped in line with the weak global economy. U.S. oil prices also rose above $70 a barrel on Monday for the first time since November 2014, as traders braced for a re-imposition of U.S. sanctions on Middle East crude producer Iran. That has encouraged international oil companies, such as BP, Chevron, ExxonMobil, Shell, and Total, which have all signaled their intentions to increase the share of gas in their reserves. This will result in more investment in both the short and long term across the supply chain of natural gas. India’s state energy company, Oil and Natural Gas Corporation, kicked off the $5.07-billion KG-DWN-98/2 project in the Krishna Godavari basin off the east coast of India by spudding (doing the initial drilling) for the first of the planned 34 subsea wells. The Italian energy company Eni also announced the approval of a development plan for the Merakes field, off East Kalimantan, Indonesia. The Indonesian government has granted approval just three months after submitting the plan and less than 11 months after Eni started production from its deepwater Jangkrik asset in Muara Bakau, Indonesia. However the new gas-exploration projects are much smaller in size due to cost-cutting efforts, analysts noted. “We are seeing significantly smaller projects, alongside a greater appetite for brownfield and expansion projects, and more subsea tie-backs,” said Jessica Brewer, a principal analyst at Wood Mackenzie. “Brownfield developments are popular in the current capital-constrained environment, with less spending and execution risk than a greenfield project, and a faster route to first production,” said Brewer, adding that both investors and operators want to see faster cycle times and quicker returns on upstream projects. Len Dawson Womens Jersey
Much optimism on gas demand; consumption to zoom in the near term
One more terminal for import of liquefied natural gas (LNG) was inaugurated last week. At first glance, one wonders why. For, the country’s demand is currently far behind the capacity to supply. Pipeline utilisation of state-run GAIL India is a mere 40-45 per cent; it is having a problem finding further markets for imported LNG. “A majority of gas-based power plants have got stranded. Between 50 to 60 per cent of the LNG we have contracted from the United States will be sold outside or swapped due to demand shortage,” said a GAIL official, asking for anonymity. Of the 25,329 Mw total of gas-based power plants’ capacity in the country, at least 14,000 Mw is reportedly stranded. Despite this, at least 10 more LNG projects are to come up, with four already operational. Taking the total capacity of terminals to around 72.5 million tons per annum (mtpa). According to a report by the Petroleum Planning and Analysis Cell of the government, against a projected consumption of natural gas of 494 million standard cubic metres a day (mscmd) for 2017-18, the consumption was 144.75 mscmd. Even so, import of LNG rose 6.6 per cent over the previous year. India is now the world’s fourth largest LNG importer. Demand optimism A four-mt Floating Storage Re-gasification Unit-based LNG terminal by H-Energy Gateway (energy venture of the Hiranandani Group) was launched last week at the JSW Jaigarh Port in Ratnagiri district of Maharashtra. The terminal is likely to be operational by the fourth quarter of 2018. “We have 100 districts in India where city gas licenses have been awarded. This June, of the 670 districts in India, another 100 will be awarded. So, demand will double. Total (annual) consumption of gas is now 40 mt and we think it will move to at least 80 mt in the next five to six years. Half of it comes from domestic sources. So, 22 mt we import and 20 mt we produce domestically,” said Darshan Hiranandani, managing director of H-Energy. He adds that all mega terminals might not but all small-scale terminals would do good business. A rise in demand is expected from power, city gas, fertiliser and industrial consumers. According to Petronet LNG, the country’s demand is set to increase by 82 per cent to 654 mscmd by 2026-27. Demand from city gas is set to zoom from 22 mscmd in 2016-17 to 68 mscmd by 2026-27. And, power sector from 157 mscmd to 309 mscmd during the period. “We expect a rise in demand post 2020 and are already in talks with refineries, power plants and petrochemical units near our planned and existing pipelines,” the GAIL official added. India is set to bring its first LNG cargo from Gazprom in May, after the Russian company and GAIL agreed to bring down prices, based on a new formula agreed this January. The company also plans to bring at least 80 cargoes of LNG from America in this financial year. GAIL has already signed a $32-billion supply deal for 20 years with the Dominion Energy Cove Point project in Maryland and Cheniere Energy’s Sabine Pass project in Louisiana. Jurrell Casey Womens Jersey
ONGC clocks 6.3% rise in gas production
ONGC registered 6.3 per cent increase in natural gas production in 2017-18 and is on track to double the output by 2022, a top company official said. It produced 23.484 billion cubic meters of gas in 2017-18 as against 22.088 bcm in 2016-17, he said. This is the highest gas output by Oil and Natural Gas Corp in five years and the growth rate is higher than the global average of 3-4 per cent year-on-year. ONGC has stepped up on bringing newer fields into production after Prime Minister Narendra Modi set a stiff target of reducing oil import dependence by 10 per cent by 2022. India currently imports over 80 per cent of its oil needs. The overall gas production, which includes production from the joint ventures, registered a growth of 5.8 per cent at 24.610 bcm, as against 23.270 bcm in the previous year. “This is the highest ever overall growth in percentage terms since 2001-02,” he said. The company is targeting gas production of 24.41 bcm during the current financial year and incur an investment of around Rs 70 billion. While the main incremental growth stand-alone basis came from western offshore, the onshore fields have also contributed substantially despite natural decline coupled with several other constraints. During the last financial year, ONGC’s offshore gas production stood at 17.845 bcm against 16.883 bcm produced in 2016-17. The onshore registered a production of 5639 bcm gas in the last fiscal year against the production of 5.205 in the previous fiscal. The growth in output was largely contributed by C-26 Cluster fields, Daman and Vasai East fields in the western offshore as well as sub-sea well S2AB in the eastern offshore, he said. From the onshore fields, there has been an increase in production particularly from Ramnad area in Cauvery Asset. There has also been a considerable increase in associated gas production from Ankleshwar and Assam Assets. When reached for comments, ONGC Chairman and Managing Director Shashi Shanker said the company has been aggressively pursuing the gas production growth in line with the government’s drive for cleaner gas economy. He said the company has charted out a mission to double the gas production at 42.7 bcm by 2021-22. “The production growth last year is only a testimony to that goal,” he said, adding the company was on track to meet the target. The total investment in the ONGC’s ambitious gas projects stands at Rs 570 billion, which is one of the highest investments in the world as far as the gas projects are concerned. This investment includes the high potential KG-DWN-98/2 project which is being implemented on a fast track basis. First gas from the project is targeted for 2019. The job for the early monetisation of discoveries both from the west and the east coast has been rigorously monitored at the highest level in order to ensure that the company’s ambitious gas production goal is achieved on schedule, Shanker said. The official said ONGC has drastically reduced gas flaring during the last fiscal, leading to considerable savings. The gas flaring stood at 1.92 per cent in 2017-18, lowest since 1999-2000. This is only technical flaring and due to non-availability of customers like in the previous years. Derek Newton Jersey
Ambani’s EWPL seeks tripling of KG gas transportation tariff
Billionaire Mukesh Ambani-led East-West Pipeline Ltd has sought nearly tripling of the tariff it charges for transporting KG gas from east coast to Gujarat. Downstream oil regulator PNGRB today floated a public consultation paper on EWPL, earlier known as Reliance Gas Transportation Infrastructure Ltd (RGTIL), seeking a rise in pipeline tariff from Rs 52.23 per million British thermal unit charged till 2017 to Rs 151.84 per mmBtu for 2018-19 to 2035-36. A rise in tariff would lead to increase in the price of electricity and fertiliser as well as city gas like CNG. “EWPL in its updated tariff filing for determination of final tariff has submitted the capital expenditure of East-West pipeline excluding interest during construction (IDC) as Rs 187.3671 billion,” PNGRB said in the consultation paper. This includes Rs 162.2730 billion of actual cape on building of the 1,460-km pipeline and another Rs 7 billion capex towards additional connectivity and Rs 18.0941 billion for maintenance and replacement. The pipeline primarily transports KG-D6 gas, which has steadily dipped from 69.43 million standard cubic metres per day achieved in March 2010 to just 4.3 mmscmd in January-March quarter. Originally, EWPL had proposed a levelised tariff of Rs 55.91 per mmBtu for transporting Reliance Industries’ eastern offshore KG-D6 gas from Kakinada in Andhra Pradesh to Bharuch in Gujarat beginning April 1, 2009. However, the Petroleum and Natural Gas Regulatory Board (PNGRB) fixed a provisional tariff at Rs 52.23 per mmBtu. The company on October 27 last year proposed a final tariff for the pipeline at Rs 78.72 effective from April 1, 2009, till the end of economic life of the pipeline — up to March 31, 2034. When PNGRB sought clarifications, EWPL updated the tariff filing to state that Rs 52.23 per mmBtu would be the tariff till 2017 and Rs 151.84 would be charged from 2018-19 to 2035-36, the regulator said in the notice. PNGRB said as the length of the pipeline is more than 300 kms, zonal tariffs — lower charge for zones near the origin of the pipeline and higher rates as the gas transverses away, will be fixed. PNGRB said when it first fixed the provisional tariff, it had assessed the pipeline’s carrying capacity of 85 million standard cubic metres per day including 21.25 mmscmd for use on a common carrier, open access and non-discriminatory basis by any third party. But the company challenged this first before the Appellate Tribunal of Electricity (APTEL) and then before the Delhi High Court. The Court had in April last year ordered fixing of the tariff once the quorum of PNGRB was complete. PNGRB became fully functional a couple of months back when the government made appointments of Chairman and members of the Board. PNGRB sought views of stakeholders on EWPL’s tariff filing within 15 days. Tomas Nosek Authentic Jersey
Arbitration hearings begin in Cairn India’s challenge to Rs 205 billion tax demand
Hearings have begun on the arbitration challenge mounted by mining billionaire Anil Agarwal-led Cairn India against a Rs 205 billion retrospective tax demand and a final order is expected in next few months, sources privy to the development said. The tax department had in January 2014 slapped a tax demand of Rs 102.47 billion on British oil explorer Cairn Energy plc for alleged capital gains it made on a 2006 internal reorganisation that saw the Indian business being transferred to a new firm, Cairn India Ltd which was subsequently listed. In March 2015, it also slapped a notice on Cairn India, which was in 2011 acquired by Agarwal’s Vedanta Group, for its failure to withhold tax on capital gains made by its erstwhile parent, Cairn Energy. Cairn India was subsequently merged into Vedanta Ltd. It is now called Vedanta Ltd. Cairn Energy had challenged the tax demand through an international arbitration and the sources said that the final hearing in that case is scheduled for August. Separately, Vedanta-controlled Cairn India too challenged the order through a different arbitration notice in March 2015. It used the UK-India bilateral investment treaty to challenge the tax notice. The sources said the Indian government challenged the invoking of the arbitration on a tax matter under the bilateral investment treaty. The three-member International Arbitration Tribunal in an order on December 28 last year held that Vedanta Ltd is an investor eligible for arbitration, they said, adding that hearing on merits of the matter began on April 29 and are likely to be concluded by May 10. Sources said the Government of India has challenged the December order of the arbitration tribunal in the High Court of Singapore. In the March 11, 2015 notice, the tax department alleged that Cairn India had failed to withhold tax on the consideration paid to Cairn UK Holdings Ltd (CUHL), a subsidiary of Cairn Energy plc, on transfer of shares to Cairn India as part of group reorganisation during 2006-07 financial year. It cited the 2012 amendments that gave tax departments powers to retrospectively tax such deals, to demand Rs 204.947 billion. This comprised of tax of Rs 102.474 billion and interest of an equivalent amount. The tax department had in the order stated that a short term capital gain of Rs 245.0350 billion accrued to CUHL on transfer of the shares to Cairn India (now called Vedanta Ltd), on which tax should have been withheld. Sources said Vedanta believes that there could be no liability on it as it could not have anticipated in 2006-07 that a law would be brought subsequently that would require withholding tax on such transactions. Vedanta had also challenged the tax demand in the Delhi High Court and the next hearing is scheduled for July 6. It had also filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the tax demand and interest against Cairn India, which was subsequently challenged before the Income Tax Appellate Tribunal. The next hearing date is not yet fixed. Derek Holland Womens Jersey