Government taking steps to ease crude oil import cost: Dharmendra Pradhan
The Government is taking various measures, including focusing on biofuels, to ease the cost of crude oil import, Union minister Dharmendra Pradhan said today. He told the Lok Sabha that the government is focusing on biofuels such as first and second generation ethanol, biodiesel and bio-CNG as part of efforts for “import reduction, environmental benefits and increased income to farmers”. Besides, efforts are on for increasing domestic production of oil and gas, capitalising untapped potential in bio-fuels and other alternate fuels, and implementing measures for refinery process improvements, Pradhan said during the Question Hour. The Petroleum and Natural Gas Minister also said the government has notified the National Policy on Biofuels 2018, which allows use of damaged food grains for production of ethanol for blending with petrol. “There is also a provision to allow surplus food grains for ethanol production during the surplus phase as decided by the National Biofuel Coordination Committee,” Pradhan said. Multiple sources have to be there for energy, he said, adding the government continues to modulate the effective price of domestic LPG supplies to domestic consumers under the Direct Benefit Transfer of LPG. “The domestic price of LPG in the country is based on international price of LPG (ie. Saudi contract price) and is not linked to the cost of crude oil,” the minister said. Deion Sanders Womens Jersey
Ukraine has 12.7 bcm of gas in storage, shows data
Ukraine had 12.7 billion cubic metres (bcm) of gas in storage as of July 28 compared with 13.01 bcm at the same date in 2017, data from gas transport operator UTG showed on Monday. Ukraine is seeking to store at least 17 bcm of gas in readiness for the winter season which starts in mid-October, the government said last week. For the past heating season from October to April, Ukraine had 16.8 bcm of gas in reserve. Ukraine consumed 32.2 bcm of gas in 2017 and imported 14.1 bcm. Ukraine, which used to rely on Russian gas imports has not bought gas directly from Russia since November 2015 and instead now imports from Europe. Relations between Russia and Ukraine have suffered since Russia’s annexation of Crimea in 2014. Brandon Marshall Jersey
Govt to launch second oil and gas field auction on August 9
The government plans to launch the auction of 60 oil and gas fields being offered in the second round of bidding for Discovered Small Field (DSF) on August 9, regulator DGH said. DSF-II was supposed to be launched around mid-June, but it was deferred. “Launch of Discovered Small Field (DSF) Bid Round-II on August 9, 2018, in New Delhi,” the upstream regulator tweeted. The 60 discoveries have been clubbed into 26 contract areas spread over 3,100 sq km spread over eight sedimentary basins, it said. The fields are being offered in Rajasthan, Gujarat, Kutch & Cambay shallow waters, Mumbai offshore, Assam and Tripura, Mahanadi shallow water, Andhra Pradesh onland and KG offshore. DGH said the main features of DSF-II include a single license for conventional and unconventional hydrocarbon, prior technical experience not a pre-qualification criterion, no upfront signature bonus and full pricing and marketing freedom. “Royalty rates further reduced as compared to DSF-I,” it added without elaborating. The fields on offer hold an estimated 1.4 billion barrels of oil and oil equivalent gas. The government had in 2016 brought a new DSF policy, offering “idle” small discovered fields of state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) in an auction on liberalised terms including marketing and pricing freedom and lower taxes. The Union Cabinet had in February approved the second round of DSF auctions, under which the government is offering a total of 60 discovered small fields with an estimated 194.65 million tonnes of oil equivalent (MMtoe). These discoveries have been clubbed into 26 contract areas spread over 8 sedimentary basins. Of the 60 fields which will be up for auctions, 22 fields belong to ONGC, five to OIL and 12 are relinquished discovered fields from the New Exploration and Licensing Policy (NELP) blocks. In DSF-I launched in May 2016, 46 contract areas consisting of 67 discovered fields spread across nine sedimentary basins were auctioned. The auctions attracted 134 e-bids for 34 contact areas of the 46 offered. Later, 22 companies were shortlisted for 31 contract areas of which 15 companies were new entrants with no prior experience in the sector. As many as 21 fields which did not receive any investor interest in DSF-I will also be part of the second DSF round. Post the February decision of the Cabinet, an Empowered Committee of Secretaries (ECS) comprising of Secretary (Petroleum & Natural Gas), Secretary (Expenditure) and Law Secretary have finalised and approved Model Revenue Sharing Contract, Notice Inviting Offer (NIO) and other documents for DSF Round-II. To expedite award, the Cabinet had authorised Minister of Petroleum and Natural Gas and Minister of Finance to approve of the winners based on the recommendations of the ECS. Brian Poole Authentic Jersey
EVs likely to pose threat to oil companies, says ICRA
Rating and research agency ICRA has observed in a recent report that the shift from petrol and diesel-driven vehicles towards electric vehicles will pose a threat to oil refining and marketing companies, particularly the newer ones. While this is intuitive, the assessment is significant because India’s downstream oil companies do not see electric vehicles as a threat. In a chat with this correspondent last December, the Finance Director of Indian Oil Corporation, AK Sharma, had said as much. He stessed that the high cost of EVs would make them unattractive. Costs of batteries And now, ICRA says the threat is real. Its analysis shows that costs of batteries are falling rapidly – from $800/kWhr in 2011 to $208 in 2017, and the expectation is that it could fall to $70 by 2030 or even earlier. (Battery capacity is measured in terms of the number of units of electricity (kWhr) it can hold, as well as the highest energy it can discharge (kW), and the number of times it can discharge-recharge (cycles) before going dead.) Crude oil prices ICRA believes that when battery costs fall below $100 per kWhr, and if crude oil prices are around $90 a barrel, EVs could take petrol and diesel-powered vehicles head on. “The high risk of electrifying the automobile fleet looms on the downstream players,” says the ICRA report. ICRA recognises the lack of infrastructure for charging vehicles – especially commercial vehicles that are used for longer hauls – as a “hurdle”. However, global companies, such as ABB, are keen on building the necessary infrastructure. Nevertheless, while the existing refineries might be able to withstand the weather, the demand disruptions because their assets are well depreciated and viability of greenfield refinery products would come under pressure in the long term, the agency cautions. It observes that Indian oil-refining and marketing companies are investing in brownfield and greenfield expansion of their refineries to satisfy the country’s growing demand. “Electrification of vehicles in the country will not mean that downstream companies will go out of business as petroleum products are also demanded by other sectors such as airways and petrochemicals,” the report notes. However, diesel and petrol form around 50 per cent of the total product volumes derived from every tonne of crude oil processed by a refinery, and a much higher share of 65 per cent in terms of value derived from crude oil, it notes. Thus, any impact on demand of auto-fuels, could have a significant bearing on the demand growth of crude oil and gross refining margins (GRMs) of refineries. San Francisco 49ers Jersey
OPINION: LNG becomes more volatile on heat wave, Trump’s trade war
Prices for spot cargoes of liquefied natural gas (LNG) in top-consuming region Asia have become more volatile amid a northern hemisphere heat wave, China’s switch to cleaner fuels and a side-helping of Donald Trump-inspired trade disruptions. The spot LNG price for September delivery in North Asia rose to $9.75 per million British thermal units (mmBtu) in the week to July 27, the first increase in six weeks. Soaring temperatures in Japan and South Korea were behind the move higher, as utilities ramped up electricity output to meet demand for air-conditioning. Japan even resorted to restarting old and dirty oil-fired power plants, in addition to boosting natural gas generation. The boost to prices last week was the latest turn in a spot LNG market that has become more volatile and sensitive to even relatively modest moves in supply and demand. The spot price reached $11.60 per mmBtu in mid-June, an unusual occurrence as it meant the peak summer price exceeded that for the previous winter for the first time since 2012. LNG has a seasonal pattern, with the peak price usually occurring in the northern winter, followed by a lower high in summer and troughs in autumn and spring. The mid-June price peak was built on strong demand from China, the world’s No. 2 importer, whose rapid growth took it past South Korea last year, although it still has some way to go to dislodge Japan from the top spot. Some supply outages at the same time in major producer Australia, as well as Malaysia and the United States, also drove prices higher in June. While the spot price has shifted up a gear, the extra demand has yet to show up in trade flows. Northeast Asia, which includes the three top LNG buyers of Japan, China and South Korea, is on track to import around 14.2 million tonnes of LNG in July, according to vessel-tracking and port data compiled by Thomson Reuters. This would be largely steady to June’s 14.8 million tonnes and 14.5 million tonnes in July last year. JAPAN DRIVING DEMAND Looking at the breakdown by country shows Japan on track to import about 6.4 million tonnes in July, up from June’s 6.03 million, but below last July’s 7.1 million. China will import around 3.85 million tonnes in July, down a tad from June’s 3.95 million, but up from 2.91 million in July of 2017. South Korea’s July imports are headed for 2.5 million tonnes, a 26 percent slump from June’s 3.4 million and also well below the 3 million from July a year ago. While China is still posting large year-on-year gains, it seems current demand for LNG is largely being driven by Japan. The dynamics of LNG flows are also shifting, partly as a result of US President Donald Trump’s escalating trade dispute with China. While trade in LNG isn’t restricted in any way as yet, it seems China is quietly discouraging its major oil and gas companies from buying from the United States. Only two cargoes arrived China in July from the United States, carrying just 0.13 million tonnes of the super-chilled fuel. This was an unchanged number of cargoes from June, but down on five vessels that arrived in May, and well below seven that unloaded in January this year. The winner in China is Australia, with imports totalling to 12.4 million tonnes in the first seven months of the year, up from 9.1 million tonnes in the same period last year. Australia has also upped its shipments to Japan, with 15.9 million tonnes arriving in the first seven months, up from 14.6 million in the same period in 2017. US LNG suppliers have had some success in shipping to Asian countries other than China, with Japan taking three cargoes in July, down from four in June and level with May. South Korea brought in four US cargoes in July, the same number as June and down from five in May. But with Chinese demand for US LNG under a cloud, it’s likely that US producers will have to offer more competitive prices to other buyers in Asia, or perhaps in Europe. This may prompt changes in the way LNG producers such as Qatar and Australia market spot cargoes, increasing volatility in a market that has shifted from being fairly predictable to one characterised by quicker and larger price swings. Kris Letang Jersey
FOCUS: How BP found shale profits with ‘crystal ball’ oilfield technology
In the pine forests of eastern Texas, oilfield workers equipped with virtual-reality goggles are helping BP’s shale business turn a profit for the first time. Thousands of automated wells feed data on their performance into the firm’s supercomputers each evening. If they show a need for maintenance, an Uber-style system summons a subcontracted repair firm to keep the shale wells flowing at optimal output and minimal cost. Such technology has helped slash BP’s shale oil and natural gas production costs by 34 per cent over five years. The shale business turned a profit for the first time in 2017, BP said, although the company declined to disclose the figure. BP’s progress in shale underpinned its $10.5 billion acquisition last week of BHP Billiton’s US shale operations. The deal highlighted BP’s newfound confidence in a sector that has challenged oil majors, which initially struggled to adjust to the quick pace and fast-evolving methods used to tap shale with horizontal drilling and hydraulic fracturing. BP and other majors that had traditionally focused on large, multi-year conventional drilling projects – such as Royal Dutch Shell and Chevron – were left behind when the shale boom took off a decade ago. The British energy giant is now catching up with smaller rivals, using technology and its institutional knowledge from global operations to push shale into a second phase that it hopes will reward its massive scale over the agility of smaller competitors. “We spent the last four years retooling our business and getting ready for this opportunity,” David Lawler, who heads BP’s shale business, said in a call with analysts after the BHP deal announcement. “We’re at the lowest production costs we’ve seen in many years. We’ll take that model, put that to work on these (BHP) assets and dramatically improve production and performance.” BP faces other large rivals in the race to grow US shale production and profits, including Exxon Mobil Corp, Chevron, Shell and Norway’s Equinor. All are expanding drilling and acquisitions, particularly in the Permian Basin of West Texas and New Mexico, the largest US oil field and the center of the shale revolution. They aim to capitalize on the vast resources unearthed by new drilling technologies, which also allow companies to start and stop production quickly in response to market shifts. That’s a key advantage over the long-term commitments of billions of dollars required by offshore oil or liquefied natural gas (LNG) projects. The BHP deal will transform BP into one of the world’s biggest shale oil and gas producers. BP’s total shale output will increase from 315,000 barrels of oil equivalent per day (boed) to more than 500,000 boed. Its reserves will jump 57 per cent to 12.7 billion barrels of oil equivalent. BP’s output of shale oil – which is worth more than natural gas – is poised to rise from about 10,000 barrels of oil per day (bpd) to about 200,000 bpd by the middle of the next decade. The deal, BP’s first major acquisition in 20 years, also marked a watershed moment for the company in the United States as it looks to leave behind the $65 billion fallout from the deadly 2010 explosion of its Deepwater Horizon rig in the US Gulf of Mexico. The BHP deal will also re-establish BP as a major player in the Permian Basin. BP had sold all of its assets there to Apache Corp in August 2010, right after the Gulf disaster. UBER, POKEMON AND OIL Today, BP operates more than 1,000 shale wells that produce mostly natural gas in the Haynesville basin, which straddles eastern Texas, Arkansas and Louisiana. It has used the data from its automated wells to create a streamlined system that farms out maintenance to a fleet of lower-cost contractors. The firm now orders up repairs much in the same way a homeowner uses a mobile app to hire a maintenance person or a passenger summons an Uber for a ride. BP puts repair work out for bid to pre-approved contractors, who then compete for jobs. Each contractor is rated after completing the work, and those with high rankings have a better chance of getting hired again. “This means we’re not hiring and firing staff all the time depending on market conditions,” said Brian Pugh, chief operating office of BP’s shale division, which the company created as a stand-alone unit in 2015. BP equips field staff and contractors with augmented reality goggles to make repairs more efficient, modeling its methods in part on “Pokemon Go,” a popular video game where virtual images appear to be in real-world surroundings on the player’s screen. The field workers are connected through their headsets to BP’s Houston offices, where experts can see and show staff how to perform repairs while they work. BP has started to collect many of these fixes in a video library so staff can call up videos, much like YouTube, to fix problems themselves without expert consultation. The company’s algorithms crunch data compiled from its wells each evening. Operators wake up each morning to a report telling them which wells may need repair, a task that once took hours each day as workers drove from well to well in search of problems. The systems, BP said, cut downtime for wells needing repairs by 50 per cent, boosting production last year by 70 million cubic feet of natural gas across its shale portfolio. The technology provides a panoramic view into the ongoing needs of the oilfield, said Kimberly Krieger, who overseas BP’s shale operations in eastern Texas. “It’s like looking into a crystal ball,” Krieger said. SLASHING COSTS, TURNING PROFITS The firm’s success in reducing costs reflects its ability to spend money automating its oil fields and overhaul work processes to drive down service and equipment costs. BP also separated its shale business from the main company to allow the business, now headquartered in Denver, to form its own culture. “We’re able to leverage the best parts of our global business to boost our shale
New branch of major oil pipeline in Shandong starts operation
China’s Qingdao port has started operations at the second phase of a crude pipeline from Qingdao port to the city of Weifang in Shandong province, the Economic Daily said on Monday * The second phase extended the crude pipe to inland independent refineries such as Chambroad, Qirun and refiners in the city of Guangrao – Economic Daily * The pipe transported 105,000 tonnes of South American crude from Qingdao port to Dongying Qirun Chemical Co on July 28, according to the newspaper Derek Roy Jersey
Reliance to shut MA oil and gas field in Krishna Godavari basin block KG-D6; here’s why
Exactly a decade after it started production, the MA oil and gas field in the Krishna Godavari basin block KG-D6 will seize to produce from September, said Reliance Industries which has battled quicker than anticipated decline in output at a block that once was its pride. Reliance had till date made 19 oil and gas discoveries in the Krishna Godavari basin. Of these, D26 or MA — the only oil discovery in the block — was the first field to began production in September 2008. Dhirubhai-1 and 3 (D1 and D3) fields went onstream in April 2009. “MA field cessation expected by September 2018,” the company said in an investor presentation post announcing first-quarter earnings. The field had in the first month produced 39,976 tonnes of crude oil and peaked to 1,08,418 tonnes in May 2010, according to data available from the upstream regulator, the Directorate General of Hydrocarbons (DGH). Output has been declining since then it produced 0.14 million barrels (1960 tonnes) in April-June quarter, Reliance said in the presentation. MA also started producing gas from April 2009, just when D1 & D6 went live. It peaked to 8.4 million standard cubic meter per day in August 2010 before sand and water ingress forced shutting down of well after well. D1 & D3 field too had a peak that year in March when it touched an output of 61.4 mmscmd. Output thereafter has only declined. Reliance said KG-D6 output in April-June averaged at 4.7 mmscmd. This was made up of production from both D1 & D3 and MA fields. In April the company had stated that “adhering to Site Restoration Guidelines issued by Government of India, RIL submitted Bank Guarantee for Decommissioning activity for existing producing fields”. While the company had not provided any timelines for decommissioning and stopping of production at the fields then, it has now said MA field would shut in September. The shutdown coincides with the expiry of the current lease of a floating production storage and offloading (FPSO) unit, which processes output from the field. Reliance is the operator of KG-D6 block with 60 per cent interest, while BP plc of UK holds 30 per cent stake. Niko Resources of Canada has the remaining 10 per cent. The government’s Site Restoration Guidelines provide for a one year notice for decommissioning of facilities. Reliance had in the field development plan for D1 and D3 proposed a capital expenditure of USD 8.836 billion. For developing Dhirubhai-26 or MA oilfield, it had in 2006 proposed to invest USD 2.234 billion, which was scaled down to USD 1.96 billion in 2012. The fields were in the investment plans supposed to last a minimum 15 years but have extinguished in exactly a decades time. RIL in the presentation said it is now developing three sets of discoveries — R-Cluster, Satellite Cluster and MJ fields in the KG-D6 block at a cost of Rs 400 billion. These fields together would bring 30-35 mmscmd of peak output. Initial gas will start flowing from 2020. Mack Hollins Authentic Jersey
HPCL storage terminal to come up in Dharmapuri
As part of efforts to strengthen its distribution network in the State, Hindustan Petroleum Corporation Ltd. (HPCL) has begun spade work for a new products pipeline from Vijayawada to Dharmapuri. The project includes the setting up of a storage terminal in Dharmapuri that would ensure the supply of fuel and lubes to the Coimbatore—Salem belt, besides Madurai and Tirunelveli. The project is estimated to cost Rs. 26.77 billion and is expected to be completed by mid-2021, HPCL sources said. The terminal will come up at Boodhanalli with an initial capacity of 4.24 million tonnes per annum (MTPA), which can be expanded to 5.85 MTPA. “The Dharmapuri district administration is currently working on getting us the land. In Andhra Pradesh, land acquisition for the pipeline is likely to get over by October. Engineering and tendering are in an advanced stage,” an official source said. Permission from various authorities, including the National Highways Authority of India and the pollution control boards of Andhra Pradesh and Tamil Nadu, as well as environmental clearance, were being sought, he added. The 697-km pipeline would run from HPCL’s Vijayawada terminal at Kondapalli and have pumping stations at Markapur and Rayachoty. The terminal would help supply aviation fuel to the Salem airport, which is 29 km away. The oil major’s current share of retail fuels in Tamil Nadu is about 21.7 %. Al Montoya Authentic Jersey
New energy policy will get cabinet nod soon
The New Energy Policy (NEP) has been finalised by government think-tank Niti Aayog and is likely to get Cabinet nod this month, sources have said. The Niti Aayog had released the first draft of the NEP in June last year and had sent it to the Union Cabinet for its nod in October. The policy aims to improve the energy security of the country by reducing dependence on imports. As of now, India is heavily dependent on oil and gas imports. External disturbances like wars and civil unrest in different countries may disrupt imports of fuel like coal, thereby affecting the country’s fuel security. Dharmendra Pradhan, Minister of Petroleum and Natural Gas, said: “Our focus is to reduce energy imports and make energy accessible to all, like fundamental rights. We are working to make energy available, affordable, and accessible.” “There are two ways in which an efficient energy supply can promote economic growth. The first one is through competitive pricing which will be critical in developing a healthy competitive environment in the energy intensive sectors of India. The second way will be through direct influence by promoting increased domestic production,” Pradhan added. In its draft report, the government think-tank had said that India’s energy demand is likely to soar around three times by 2040, leading to increase in overall primary energy imports. It had also made a case for a single regulator to govern India’s energy market to make “India’s economy energy ready” by 2040. According to the draft NEP 2017, the incumbent government aims to take the energy policy forward from the 2006 Integrated Energy Policy (IEP) which was drafted by the Congress-led United Progressive Alliance government. The value proposition of the NEP is to present a broad framework for the overall energy sector, taking into account the multiple technology and fuel options. A senior official of the Ministry of Petroleum and Natural Gas said: “In the draft NEP, the Niti Aayog has recommended many revolutionary reforms, such as opening up of the entire power sector value chain to private investments in order to create an efficient electricity market. These recommendations are going to prove a game-changer in the future.” “Also, the NEP makes revolutionary recommendations on how India should work towards developing and acquiring technology needed to sustain the energy sector in the future,” the same official cited above said. Dustin Colquitt Womens Jersey