India’s dilemma: Donald Trump or cheap Iran oil
The US embargo on Iran oil shipments has put Prime Minister Narendra Modi in a quandary. If he plays along, India could find itself on the right side of President Donald Trump on trade but lose cheap supplies and precious foreign exchange. Oil imports from Iran totaled about $9 billion in the year ended March and substituting some of the contracts with more North American crude will help India lower the $24.5 billion trade surplus it runs with the world’s largest economy. The South Asian nation is already buying more crude from the US, data from the Census Bureau and Energy Information Administration show. While ending purchases from Iran will cost India savings on shipping costs and the longest credit period offered by any of its suppliers, there are gains to be had from paring the trade surplus with the US — at the heart of Trump’s trade war with China. For one, it will soften the approach on thorny issues such as India being named in the US Treasury’s watchlist of potential currency manipulators who use exchange rates to boost exports. “The upcoming sanctions on Iran provide a golden opportunity to commercialize more US oil in the Indian market,” said Abhishek Kumar, a senior energy analyst at Interfax Energy in London. “Escalating trade tensions between the US and China will also be conducive to more US oil coming to the Indian market.” India has been preparing for alternative supplies after the US decision to reimpose sanctions on the Persian Gulf state. Narrowing the trade surplus may also help India win a possible exemption on US tariffs on some products, including steel and aluminum. India, for now, has announced retaliatory tariffs on a slew of US imports but said the room for talks are open. Largest Volume Crude imports from the US rose 800 percent month-on-month to 4.72 million barrels in May, the largest volume since at least 2015 for which data is available. India, the world’s fastest growing oil user, could bridge the surplus by up to $4 billion through oil imports alone, government officials said in April. But there are limitations to how much India can buy from the US at the moment. The US currently has only one export terminal that can accommodate 2-million-barrel supertankers preferred by faraway customers in Asia and expansions at other ports aren’t expected to be completed before 2020. Indian Oil, the South Asian nation’s biggest refiner, is working on possibilities of entering into term contracts for US volumes, instead of the current practice of purchasing from the spot market, Chairman Sanjiv Singh said in an interview. There’s potential for India to increase oil purchases from the US, whose first shipment reached the South Asian nation in August 2017 after Washington lifted its four-decade-long curbs on crude oil exports. “The US is focused on boosting its hydrocarbon exports to India,” said Interfax’s Kumar. “A wide front-month futures price premium of Brent over WTI will further provide a competitive edge to oil sourced from the US” Michael Johnson Jersey
ANALYSIS: For the global LNG industry, is the FSRU honeymoon over?
A giant vessel docked at the port of Moheshkhali in Bangladesh two months ago, propelling the populous but poor nation into the fast-expanding club of liquefied natural gas (LNG) buyers. The Excellence is the latest floating storage and regasification unit (FSRU), a type of carrier that has proliferated since 2015 as many countries switch to a cleaner and increasingly cheaper fuel than oil and coal. But the young FSRU industry has been beset by more project delays than successes in the past 12 months as fluctuating energy prices, shipping rates, government policies and not least strong demand for gas in China reshape the sector. With the number of countries importing LNG having risen to 42 from 30 in three years, “plug and play” projects, in which regasification vessels link to well-worn physical and commercial infrastructure, are expected to continue if at a slower pace. But strong Chinese demand for super-chilled LNG has dampened the allure of projects in other countries by lapping up excess supply, and new entrants are trying to develop smaller ventures. “In the last year or so, FSRUs have suffered a bit of a setback from the stellar growth they were previously enjoying,” Andrew Buckland, Wood Mackenzie’s global LNG trade and shipping principal analyst, said. “Some of that is down to conditions unique to particular proposed projects. But a lot of it is more to do with demand being stronger than expected in existing conventional markets.” Since a golden period between 2015 and 2017, when almost half of the world’s 34 FSRUs came onstream, projects in Ghana, Pakistan and Ivory Coast have been scrapped and in countries such as Chile, Croatia and South Africa, delayed. Those stung include oil majors such as ExxonMobil, trading houses including Trafigura and shipping companies that provide FSRUs such as Norway’s Hoegh LNG. Some have backed off; others have regrouped in different configurations. PLUG AND PLAY FSRUs are relatively new – the first was put in operation in 2005 by Excelerate, which figured out how to fit an entire LNG terminal onto a single ship. The unlisted US company, together with Golar and Hoegh, now dominates the industry. On the face of it, they have a big advantage over onshore import terminals – cheaper by half at around $300-400 million, twice as quick to deliver and flexible to boot because the vessel can journey to other destinations once it is not needed. This was shown by Egypt’s first FSRU project, completed by privately owned BW Group within just five months at Ain Sokhna on the Suez canal. But the project was an ideal “plug and play” venture: suffering severe power cuts as its own gas output fell, Egypt had the infrastructure to accept regasified LNG. Conversely, Ghana demonstrates the difficulties of what are still complex projects despite their lower costs and lead times. The country has yet to enter the LNG club despite coming so close that two FSRUs were earmarked for two projects. Here, issues related to the construction of onshore infrastructure and solid contracts with power plants, the end consumers of the LNG, delayed and scuppered successive ventures. The Golar and Hoegh FSRUs were reassigned to other locations. “Developing countries by their nature have limited capacity when it comes to policy and regulatory structures,” said Lance Crist, head of natural resources for International Finance Corp, a World Bank arm that has lent to several FSRU projects. “Many of these are much smaller markets. You’re not talking about large, liquid markets with established infrastructure where you can just plug and play,” he said. LESS NEED FOR NEW MARKETS While the Ghana saga unravelled over the past three years, global LNG market trends changed the dynamics of FSRU projects. Rates for transporting LNG rose, boosting the revenues of LNG shipping companies that were thinking of branching into FSRUs, and China’s demand for gas skyrocketed, soaking up an anticipated oversupply in the market. China’s environmental drive to convert heating plants from coal to gas drove 40 percent of global LNG demand growth last year and increased Chinese gas imports by 15 percent, making it the second-largest LNG buyer after Japan, the International Energy Agency said in June. This created less urgency to open new markets by parking FSRUs in countries that had hitherto not bought LNG. Existing terminals, usually underused, took more supplies. The result has been a slowdown in the delivery of planned projects. “Prior to last winter, when it looked like there’d be excess LNG, creating new demand centres via FSRUs looked a more attractive strategy than it does now,” Buckland said. “Which is not to say they won’t come back to that in the future.” Meanwhile, LNG carrier rates, which slumped to $25,000 per day in 2017, more than tripled to $85,000 a day. This meant those companies that operate LNG carriers but wanted to join the FSRU bonanza had missed the boat – at least for now. For example, LNG carrier company Flex LNG backed out of the FSRU business in May, saying shipping rates and project delays had made the move unattractive compared to improved carrier rates, its chief source of revenue. LESS IS MORE Some large projects are still due to come onstream, if at a slower pace: Ivory Coast is scheduled to become an LNG-buying nation by 2020 with a Total project using a Golar FSRU. The rush of new projects between 2015 and 2017 together with predictions of LNG oversupply also attracted trading houses wanting to secure markets for the rising volumes they bought and sold. Trafigura, Vitol and Gunvor have competing plans for FSRUs in Pakistan after the country became an LNG importer in 2016 but have failed to get projects in Bangladesh off the ground. Now the urgency has receded with China’s growing appetite for LNG. But there has been a proliferation of much smaller projects: LNG-to-power ventures, FSRUs for single users such as gas-intensive fertiliser plants and “petrol stations” for ships using LNG as bunker fuel in northern Europe. “The old
Iran shall continue to supply oil to India: Abbas Araghchi
Iran’s deputy foreign minister Abbas Araghchi was in India to hold foreign office consultations. His visit assumed significance in the wake of US sanctions threatening to block oil supplies to India. In an exclusive interview to WION, he indicated that both countries were exploring ways to circumvent US sanctions by making oil payments in rupee or euros, which means a sort of trilateral cooperation between Iran, India and the European Union. India has also agreed to allow Iran’s Pasargad Bank to open its branch in Mumbai to facilitate payments for oil imports. The foreign ministers of both countries are also meeting in Tehran in November to further strengthen the mechanism and explore further possibilities. Excerpts: You held consultations with your Indian counterparts. Was there any way out on the issue of oil payments in the wake of US sanctions? Yes, oil was one of the main subjects of discussion. Iran and India have been partners for long. Previous US sanctions didn’t stop our ties. Iran shall continue to be a supplier of oil to India. Did you discuss any mechanisms that will come into force after the US sanctions? Different ideas are under consideration. We will update, adjust existing mechanisms. We exchanged some creative ideas in the meetings here. Will it affect Chabahar port project? We are quite satisfied with the ongoing work at Chabahar. It is an example of strategic cooperation. It has importance for Afghanistan and Central Asia. Iran attaches great importance to the port project. Donovan Smith Jersey
Crude oil futures fall on weak Asian cues
New Delhi, Jul 18 Crude oil futures fell by Rs 36 to Rs 4,633 per barrel today as speculators cut down bets amid weak cues from the Asian markets. At the Multi Commodity Exchange, crude oil for delivery in July was trading lower by Rs 36, or 0.77 per cent, to Rs 4,633 per barrel in 1,245 lots. Similarly, crude for delivery in August fell by Rs 33, or 0.71 per cent, to Rs 4,596 per barrel in a business volume of 167 lots. Analysts said trading sentiment remained weak after oil prices fell further in Asia and profit-taking by participants. Globally, West Texas Intermediate (WTI) crude oil was down 28 cents, or 0.42 per cent to USD 66.88 a barrel, while Brent too shed 36 cents, or 0.50 per cent, to USD 71.80 a barrel on the New York Mercantile Exchange. Darryl Morris Jersey
Surprise! India now has too much electricity — and it has a cost
With the successful push for tapping the renewable energy, India, which once faced electricity shortage now has too much of it. India’s gross electricity capacity is much higher than the demand. “For a change, shortfalls have fallen dramatically and there is talk of “surplus” power,” a report by Brookings India said. However, as every electricity grid operates in a balance between supply and demand, usually with a slight surplus of capacity to meet eventualities and uncertainty—too much surplus becomes expensive, the report warned. One the biggest problems could be having a surplus average energy but now having surplus capacity all the time. “Renewable Energy (RE) creates particularly acute issues for the grid since it is both variables as well as likely available only at specific times,” the report said, adding that the target of 175GW renewable energy production by 2022 is “top-down”, set by the central government, and doesn’t incorporate much (if any) feedback by DisComs on how much power of what type is needed by that year. “…load-shedding is often an economic issue where state utilities (the distribution companies, or DisComs) are not buying sufficient power because they are cash-strapped and bleeding money,” the report added. Moreover, another challenge is that the coal-based capacity has grown at over 12% annually, double the growth rate of power demand. This creates a lot of overhang that impacts grid economics. The challenge is also the targeted 175 GW of RE is disproportionately concentrated in a handful of states. Karnataka today already has almost 5 GW of solar and more of wind, far ahead of its targets. “The entire systems planning has to shift from one of managing scarcity to managing surplus, at least for parts of the day or year,” the report said. The problem of higher supply of power as compared to demand was also highlighted by NITI Aayog CEO Amitabh Kant, who said that unless the demand for power is created, the woes of power companies would not end. Discoms in India, so far, have suffered losses due to corruption, electricity theft and non-repayment of bills. To pull discoms from the abyss, the government launched the ‘UDAY’ bailout scheme. However, the electricity surplus seems to have been posing another risk to these discoms. Damontae Kazee Authentic Jersey
SEBI May Not Give Green Signal To Petrol And Diesel Future Contracts
The Security and Exchange Board of India (SEBI) is unlikely to approve the Multi Commodity Exchange (MCX) and Indian Commodity Exchange’s (ICEX) applications for launching futures contracts in petrol and diesel, sources aware of the development told Moneycontrol. This is because both petrol and diesel are politically sensitive fuels, given their ability to influence retail and wholesale inflation, sources said. In December last year, both the exchanges had filed applications with SEBI. The capital and commodities market regulator had written to the petroleum ministry seeking an in-principle approval for the contracts, which the ministry had given in May. Dan McCullers Jersey
Two PDVSA’s oil upgraders to be halted in coming weeks -sources
Two of Venezuela’s four crude upgraders are scheduled to undergo previously delayed maintenance in the next few weeks, according to three sources close to the facilities, further reducing state-run PDVSA’s exports of upgraded crude. The upgraders, which convert the extra-heavy oil produced in Venezuela’s Orinoco Belt into exportable grades, have a combined 700,000 barrel-per-day (bpd) capacity. The maintenance projects, including one that had been expected to begin in April, have been deferred due to lack of spare parts and outages. The work temporarily will reduce the amount of upgraded oil available, but will help ease tanker congestion at the country’s main port of Jose. The OPEC-member’s oil production fell to 1.34 million bpd in June, according to secondary sources cited by OPEC, the lowest level since the 1950s. Oil is Venezuela’s main export and the decline has deepened an already severe economic crisis. The 150,000-bpd Petromonagas upgrader, operated by state-run PDVSA and Russian joint venture partner Rosneft, is expected to start major maintenance work by early August, according to the sources. Repairs to the 210,000-bpd Petropiar upgrader operated by PDVSA and U.S. company Chevron Corp will also start in coming weeks, the sources said. There was a fire at that facility in June during its restart process. When the upgraders are out of service, extra-heavy oil is blended with imported naphtha to produce diluted crude (DCO). But the volumes of DCO exported typically are lower than the upgraders’ capacity. In a meeting this week with some Orinoco Belt partners, Venezuelan officials complained about delayed maintenance affecting the upgraders, which has led to more exports of less-valuable DCO, according to a person that attended the meeting. PDVSA did not reply to a request for comment. Venezuela’s oil exports this year have been limited due to output declines. Asset seizures by ConocoPhillips to enforce an arbitration award have also crimped sales by depriving PDVSA of most of the Caribbean terminals it once used to store and ship oil. As the two upgraders are taken out of service for maintenance, PDVSA aims to restart the 160,000-bpd Petro San Felix upgrader in the coming weeks, after several interruptions in recent months for repairs. The 190,000-bpd Petrocedeno, operated by PDVSA, Total and Equinor, is working at reduced rates due to repairs and spare parts. A major maintenance project there is expected to start in early 2019, the sources said. Fran Tarkenton Authentic Jersey
ONGC board approves exiting Pawan Hans, to sell 49% stake
The board of ONGC has approved exiting helicopter service provider Pawan Hans by selling its entire 49 per cent stake as it looks to cut debt and consolidate resources in core oil and gas business, officials with direct knowledge of the development said. Oil and Natural Gas Corp (ONGC) wants its interest to be clubbed with the 51 per cent government stake that is already on offer for sale, they said. The Department of Disinvestment and Public Asset Management (DIPAM), which floated the offer for sale for government’s 51 per cent stake in Pawan Hans twice in the last 10 months, is likely to issue an amended expression of interest (EoI) shortly. Officials said ONGC of the view that its investment in Pawan Hans is no longer strategic as it charter hires helicopters to ferry staff to its oil and gas locations, mostly in offshore, through competitive bidding. Of the 22 helicopters it currently has on hire, just seven or less than a third are from Pawan Hans. Pawan Hans owns a fleet of 46 helicopters. “The board of directors of ONGC, at the 308th meeting held on June 29, accorded its in-principle approval for exploring options for the restructuring of ONGC group companies including exiting some with a view to consolidating business,” an official said. “The idea being to focus resources on core oil and gas exploration and production business and not scatter bandwidth of management in unrelated businesses,” the official added. Officials said when the government had first floated an offer to sell its 51 per cent stake in October last year, ONGC made an offer to DIPAM that its 49 per cent stake be also sold on same terms. At that time, the company was told to get its board approval. Meanwhile, the government in early April withdrew its offer for sale as only two bidders including Indian helicopter major Global Vectra Helicorp and US-based Continental Helicopters made an offer. A revised offer for sale was floated later that month, which fetched about half a dozen bidders. ONGC, they said, has written to the government that its stake can be sold on the same terms, but DIPAM was of the view that a revised offer for sale would have to be floated as some bidders may have been deterred by 51 per cent stake and would now prefer to bid when 100 per cent is being offered. Sources said the re-floating the offer for sale is likely to delay further the government’s plans to offload its entire 51 per cent holding in the profit-making JV. “ONGC has written to the civil aviation ministry that it does not want to continue in the joint venture and would want to sell its entire holding in it along with the government,” a Pawan Hans source said. Pawan Hans operates seven Dauphin N3 Helicopters for ONGC’s offshore operations. These helicopters, based at Juhu airport, Mumbai and Rajahmundry, undertake passenger crew change service and production trips on a regular basis to meet the offshore requirements of the state-owned oil and gas producer. “ONGC wanted to exit the JV along with the government, but it was told to first get its board approval, which is now in place. The government will now modify the EoI and include ONGC stake sale also along with its own,” an ONGC official said. The government came out with a fresh information memorandum for the strategic sale of Pawan Hans on April 13 wherein bidders need to have a minimum net worth of Rs 500 crore. The memorandum was issued days after the government withdrew the previous note apparently due to a tepid response from investors. The last date for submission of EoIs for Pawan Hans was June 18. On June 20, civil aviation secretary R N Choubey had told reporters that “bids have been received for Pawan Hans stake sale.” Clayton Fejedelem Jersey
Shell hopes to ship LNG for sale in Indonesia, says energy ministry official
* Oil major Shell and its partner are seeking to import liquefied natural gas (LNG) into Indonesia, an energy ministry official said on Tuesday. * “Shell has proposed to the government to import LNG,” Oil and Gas Director General Djoko Siswanto told reporters, adding that the request had not yet been approved and Shell had been asked to present its plans to the government. * Shell and its partner had already found a buyer for the fuel and would build an LNG receiving terminal, Siswanto said without naming the partner or providing further detail on the proposal. * Siswanto also cautioned that any imports by Shell must not prevent domestic LNG producers from finding buyers. Radim Vrbata Jersey