India hopes to finalise partners for strategic oil reserves within a year
India hopes to forge partnerships with private players to build out its strategic petroleum reserves within the coming year, the head of Indian Strategic Petroleum Reserves Ltd (ISPRL) said on Monday. India’s government approved two strategic petroleum reserve (SPR) sites with a total capacity of 6.5 million tonnes in June. H. Ahuja, the chief executive of ISPRL, said on Monday that ISPRL, a government-owned a special purpose vehicle, planned to get bids from investors for the second phase of the storage plan in six to nine months. Ahuja was speaking on sidelines of the India Energy Forum by CERAWEEK.
Why China may soon regret its tariffs on US natural gas
Beijing’s tariffs on U.S. liquefied natural gas threaten to raise prices for buyers throughout Asia and deal a self-inflicted wound to China’s state-owned energy companies. The import tax on American LNG essentially removes U.S. suppliers from consideration at trading desks across China’s growing LNG market. There are plenty of supplies elsewhere in the world, but in closing the door to U.S. LNG, China is throwing a wrench into the market and giving sellers an opportunity to hike prices. In the year through June, China was the second biggest buyer of U.S. LNG, according to energy research firm Wood Mackenzie. China is trying to shift from coal to cleaner-burning natural gas as the government aims to reduce air pollution. But the country’s domestic gas production and pipeline imports are not growing fast enough to meet demand, so China is turning to LNG, a form of natural gas super-chilled to liquid form and transported by sea in massive tankers. Despite its dependence on LNG, Beijing nevertheless imposed a 10 percent tariff on U.S. supplies last month, retaliating after the Trump administration slapped a 10 percent import tax on $200 billion of Chinese goods. The world’s two largest economies play an influential role in the on-demand market for LNG — China as a buyer and the United States as a seller. Their trade dispute promises to redirect LNG trade routes and reverberate throughout the market. It also comes ahead of winter, when demand is highest and LNG customers are vulnerable to price spikes. “The market has been balanced to tight this year,” said Bob Ineson, IHS Markit executive director for global LNG. “You’re probably going to be in a fairly strong pricing environment through the winter.” Chinese buyers have already moved to limit the impact by purchasing most of the LNG they’ll need to meet demand this winter, according to Wood Mackenzie. The firm estimates that China will need to buy about 8 million tons of LNG on the spot market, where commodities are purchased for immediate delivery or shipment in the near future. “The impact will depend on how short the market runs this winter and the extent to which China needs to buy additional LNG, which will partly be determined by weather,” said Giles Farrer, research director for global gas and LNG supply at Wood Mackenzie. U.S. companies like Cheniere Energy pump a lot of LNG into the spot market, providing a chunk of flexible supplies for buyers who want to swap cargoes to take advantage of price differences and shorter delivery times. Analysts say Chinese buyers will try to swap cargoes as much as possible to avoid the tariffs on U.S. LNG. If they can’t find other cargoes, they’ll be stuck paying the 10 percent duty. But China may have to pay a premium in any case, said Farrer. Since China artificially raised prices on U.S. LNG by 10 percent, suppliers in Australia, Qatar and Southeast Asia can get away with charging Chinese buyers just below the cost of LNG from the United States, including the tariff. That markup would tack another $4 million to $5 million on LNG cargoes for Chinese buyers, according to Wood Mackenzie. Those costs would be absorbed by the state-owned companies like CNOOC, PetroChina and Sinopec, which dominate the country’s LNG purchases. On the opposite end, American suppliers like Cheniere and traders like Trafigura and Vitol would stand to benefit. The situation provides an incentive for European LNG buyers to resell U.S. cargoes to Chinese energy companies, said Katie Bays, head of energy and industrials at Height Capital Markets. The resales, already an emerging trend this year, allow European utilities to capitalize on high LNG prices in Asia. They also allow China to avoid tariffs because once LNG is loaded into European storage tanks, it is no longer considered American gas, Bays said. Asian LNG prices need to trade about $3 per million British thermal units above European prices for the reloadings to make economic sense, according to Wood Mackenzie. The gap between the prices has narrowed, but the firm anticipates those conditions will return this winter. According to Bays, the United States would make more money in every one of those scenarios. “If you add inefficiencies to the market, the result of that — and the only result of that — is that prices will have to go up to compensate the market and create a new, efficient solution,” said Bays. “If you’re a seller, that’s a great place to be. If you’re a trader that’s a great place to be,” she said. “But if you’re a buyer, it’s a tough spot.”
Railways awaits regulatory nod for LNG trial run
After a successful experimental run with CNG, Indian Railways has set its eyes on LNG as an alternative fuel option. The transporter is awaiting regulatory approvals for conducting trials. LNG requires less storage space than CNG which makes it a more efficient and convenient option. By storing LNG in the same space as CNG, trains can run for three times the distance, according to experts. The CNG experiment was conducted on 21 trains. LNG is already being tried out in other countries, including Russia, North America and Spain. The CNG experiment Of the trains running on CNG, 20 are in the Northern Railways and one in Vijayawada region (South Central Railway). A decision on scaling up CNG train-run experiment depends on whether more refuelling stations can be set up. Theoretically, use of CNG resulted in 8-11 per cent savings against a similar train running on diesel. However, in CNG-based trains, the Railways has fitted cascades, a group of cylinders, with storage space for CNG that takes away the space equivalent to a third of a full coach. Replacing the energy storages with seats, would have resulted in extra revenue for the Railways.Now, it wants to try out LNG as alternative fuel and estimate the savings it can make. LNG scores over CNG in several areas including space required for storage which means a train can run for a longer distance with the same amount of LNG. “In the space allocated for CNG storage in trains, Railways can store LNG, which will generate three times the energy. In simple terms, same amount of LNG stored in the space meant for CNG can haul a train for a much longer distance without requiring refuelling, and thus without having to stop,” Subodh Kumar Sagar, Chief Mechanical Engineer, Indian Railways Organisation for Alternate Fuels (IROAF), said in a conference recently. Regulatory nods Railways needs a regulatory mechanism to install the storage in trains, and in terminals, from Lucknow-based Research Designs and Standards Organisation (RDSO) and Nagpur-based Petroleum Explosive Safety Organisation. The Railways now requires a network of LNG fuelling points to ensure refuelling capacity. Trial run For the trials, the Railways mulls attaching an LNG tanker to a train which can be refuelled at end of the journey. The cost-benefit analysis is yet to be finalised. Based on early estimates, a railway official explained, “Installing an LNG tanker will require 30 per cent higher capital expenditure than CNG, while the running cost of LNG will be cheaper by 40 per cent.” The biggest expenditure will be on the refuelling infrastructure, which will have to be decided at a national level. The refuelling infrastructure requires points for storage, retail, decantation, and filling the tanks. “Railways had increased its adoption of biodiesel in fiscal 2015-16 and 2016-17 which dropped in 2017-18. This dip can be attributed to GST implementation which impacted biodiesel makers. Biodiesel became more expensive than diesel,” shared an official. Another alternative energy that Railways has started adopting is solar, both at stations and on trains.. Flexi-solar panels for trains, developed by a public sector unit Central Electronics Limited, are able to generate enough power to meet light and fan requirements of coaches.
Global LNG: Asian spot prices fall as November cargoes offloaded
Asian spot LNG prices fell this week as sellers struggled to offload the last of their November cargos and Chinese demand for December supplies failed to materialise significantly after a frenzy of Asian buying last month. November spot LNG fell 50 cents to $10.50 per million British thermal units (mmBtu) though trades were sparse and the bid-offer spread was wide. December prices were cited as low as $10.50 although a trade was heard at around $11.10. Crude [O/R], which was heading for a first weekly fall in over a month as part of a global market rout, also weighed on LNG as many contracts are linked to the oil index. Spot Asian LNG spiked last month in anticipation of winter demand after a hot summer depleted stockpiles. China was seen as providing support to prices after the country got caught short last winter with its storage capacity still low. However, that has not been the case so far this month. “China has been pacing down supplies, so as not to spike prices again,” said one LNG trader. “Storage is a fact but I guess they are replacing volumes a little wiser than last winter.” Another trader said a November cargo was bought by Osaka Gas for $10 per mmBtu although the Japanese utility had a wide delivery window and quality specification to make the sale attractive to suppliers. “There’s some distressed sellers out there; the bid offer spread is wide,” said one LNG trader. Turkey’s Botas closed a tender on Friday for 13 cargoes to be delivered in the first week of each month from November to February, according to several sources. WINTER START-UPS In the absence of a surge in demand, supplies were so far healthy going into the winter months, traders said. Japan’s Inpex said last week it had shipped its first condensate cargo from the mammoth Ichthys LNG project in Australia, which was seen as a prelude to LNG exports. Russia’s Yamal facility in the Arctic pumped a record 2.4 million tonnes of LNG in September and operator Novatek said its third train would begin operations in December, some 6 months ahead of schedule. Traders say Yamal’s restrictions lie more in the number of Arctic-class vessels available to ship the LNG than output. Two more Arc7 vessels, the Georgiy Brusilov and the Boris Davydov are now undergoing sea trials before joining Yamal, according to Refinitiv Eikon data. The start-up of a number of export projects in the United States will also add to supply, with some still expecting the first cargoes from Cheniere Energy’s Sabine Pass 5 and Corpus Christi 1 to hit the spot markets this year. Several traders mentioned the private tenders of multi-year strips from Corpus Christi 2, expected to begin operations next year, and Dominion Energy’s Cove Point. They said India’s Gail, which is committed to buying 5.8 million tonnes of LNG a year from the United States, was tendering Cove Point cargoes from 2021. Australia’s Woodside Petroleum and Indonesia’s Pertamina, both big LNG players, were also looking to sell Corpus Christi 2 cargoes. A three week planned outage at Cove Point is expected to end at the weekend.
EXPLAINER: Why India wants investors to fill its caves with crude oil
Amid the volatility in the global crude prices, the government is planning to increase its capacity of oil reserves and is seeking investments from oil traders and producers. Caves of oil: They are called strategic petroleum reserves (SPRs). India has three underground storage facilities (built at the cost of Rs 4,100 crore) that can store 5.33 million tonnes of crude oil. Oil in caves: The one in Visakhapatnam is filled with 1.33 MMT of oil purchased by the government, another in Mangalore (with 1.50 MMT capacity) has been half-filled by the government and another half leased to Abu Dhabi National Oil Co, and the third in Padur, Karnataka, is built but awaiting oil for storage. Dig some more: Cabinet early this year approved two more SPRs: a 4.4 million tonnes SPR at Chandikhol in Odisha and a 2.5 million tonnes facility at Padur in Karnataka. What now? Centre is seeking $1.5 billion in investments from global oil producers and traders to build the two additional reserves. It plans to hold roadshows in New Delhi, Singapore and London this month to draw investors. Getting private investors will lessen the financial burden on the government. Private or public? While the oil will be filled by private companies, India will reserve the first right over the crude. Government-owned Indian Strategic Petroleum Reserves Ltd (formed in 2006) will collaborate with private entities to invest in the project. Why? For India’s energy security (we import 85% of our crude needs), and to insulate us from external price and supply shocks. The oil in the three SPRs already built can help meet 10 days of crude requirement, and the two planned ones can hold supply of about 12 more days. What crisis? There was one during the Gulf War in 1990, when our oil reserves were adequate only for three days. Plus, others like US, Japan, China, UK and EU have it too.
Top US Envoy On Oil Import From Iran: India Will Talk To European Countries
After the US sanctions on Iran, there are many things about India coming out of oil import from Iran. Now it is revealed that India will take its decision after the talks with the US. Significantly, after China, India is Iran’s second largest oil importer. With regard to closure of imported crude oil from Iran completely close to the November 4 deadline fixed by the Trump Administration, one US diplomat on Iran affairs to discuss India in this regard, this week, New Delhi US Special Representative for Iran, Brian Hook, will travel to Europe besides India to discuss US foreign policy towards Iran. According to the Ministry of External Affairs, Hook will discuss with his “colleagues and partners” to fully rein in Iran’s destructive behavior in West Asia and its own neighborhood during his one-week long journey. Francis R., Assistant Secretary of State for Hook and Energy Resources, during the visit to India. Fanon will meet his counterparts for advice. At the same time, in Luxembourg, he will interact with officials gathered for the meeting of the European Union Ministers. According to the Ministry of External Affairs, the officials of the Hook and Energy Resource Bureau in France will meet the Executive Director of the International Energy Agency. In Belgium, he will meet his EU counterparts and discuss the continuation of the Iranian government’s missile program. Meanwhile, the Ministry of External Affairs says that he expects all associate countries to stop buying crude oil from Iran by November 4 or be ready for penal sanctions. India will continue to buy crude oil from Iran even after November 4, in response to a question on media reports in this regard, State Department spokesman Heather Knott said that this is not helpful. Knut said that in relation to all the restrictions that will take effect from November 4 and you are referring to the restrictions on Iran’s oil and the countries that continue to purchase crude oil from Iran, Have talked with your partners and colleagues all over the world. He said that our policies against those countries are very clear.
Oil prices rise amid Saudi tensions, but demand outlook drags
Crude oil futures rose sharply on Monday as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked worries about supply, although concerns about the long-term outlook for demand dragged on prices. Crude markets were also supported in the wake of data that showed South Korea did not import any oil from Iran in September for the first time in six years, before U.S. sanctions against the Middle East country take effect in November. Brent crude had risen 98 cents, or 1.22 percent, to 81.41 a barrel by 0124 GMT, on track for its biggest daily gain since Oct. 9. U.S. crude futures climbed 80 cents, or 1.12 percent, to $72.15 a barrel, extending gains they racked up on Friday after hefty losses on Wednesday and Thursday. “The market has again expressed concerns over geopolitical tensions in the Middle East after U.S. and Saudi traded comments over the disappearance of the Saudi journalist, leading to a jump in prices,” Wang Xiao, head of crude research with Guotai Junan Futures, wrote in a research note. Saudi Arabia has been under pressure since Jamal Khashoggi, a prominent critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul. The kingdom would retaliate against possible economic sanctions taken by other states over the case, its state news agency SPA reported on Sunday quoting an official source. Meanwhile, South Korea stopped importing Iranian oil for the first time in years. “South Korea’s move to stop Iran oil imports is giving the market confidence on prices,” said Chen Kai, head of research with futures brokerage Shengda Futures. Lingering geopolitical worries, trade concerns and a weaker economic outlook may pave the way for another week of volatile trading, Chen said, adding that Monday’s recovery in prices was “fragile”. Putting downward pressure on oil prices, the International Energy Agency, the West’s energy watchdog, said in its monthly report that the market looked “adequately supplied for now” and trimmed its forecasts for world oil demand growth this year and next. That comes after the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) last week said the group sees the oil market as well supplied and that it was wary of creating a glut next year.
PM Narendra Modi to brainstorm oil scenario with global energy company CEOs
Prime Minister Narendra Modi will brainstorm with chief executives of top global and Indian oil and gas companies on Monday on emerging energy scenario, with ripples from US sanctions on Iran and volatile oil prices threatening growth. The third annual meeting would also deliberate on ways to revive investment in oil and gas exploration and production, official sources said. Modi’s first meeting was on January 5, 2016 where suggestions for reforming natural gas prices were made. More than a year later, the government allowed higher natural gas price for yet-to-be-produced fields in difficult areas like deep sea. In the last edition in October 2017, suggestions were made for giving out equity to foreign and private companies in producing oil and gas fields of state-owned ONGC and OIL. But the plan could not go through in view of strong opposition from Oil and Natural Gas Corp (ONGC). Sources said Saudi Oil Minister Khalid A Al Falih, BP CEO Bob Dudley, Total head Patrick Fouyane, Reliance Industries Chairman Mukesh Ambani and Vedanta chief Anil Agarwal are expected to attend the meeting Monday. The meeting, coordinated by the NITI Analog, is likely to focus on challenges posed by volatile oil prices and the US sanctions on Iran. The meeting would look at measures to attract investments and steps for making it easier to do business in India. Sources said reforms initiated in the last four years in the oil and gas sector, including open acreage policy, pricing reforms and liberalised licensing policy, will be showcased and suggestions would be sought on what more can be done to hasten growth. The government is looking at private investment to raise domestic oil and gas production, which has stagnated for the last few years while fuel demand has been rising by 5-6 per cent annually. India is dependent on imports to meet 83 per cent of its demand and more than half of its natural gas requirements. The Prime Minister in 2015 had set a target of reducing India’s oil dependence by 10 per cent to 67 per cent (based on import dependence of 77 per cent in 2014-15) by 2022. Import dependence has only increased since then and the government is now looking for ways to raise domestic output. Organization of the Petroleum Exporting Countries (OPEC) Secretary General Mohammed Barkindo and India’s Oil Minister Dharmendra Pradhan would also attend the meeting, they said. Also likely to attend the meeting are ONGC Chairman and Managing Director Shashi Shanker, Indian Oil Corporation (IOC) Chairman Sanjiv Singh, GAIL India head B C Tripathi, Hindustan Petroleum Corp Ltd (HPCL) Chairman Mukesh Kumar Suran, Oil India Chairman Utpal Bora and Bharat Petroleum Corp Ltd (BPCL) Chairman D Rajkumar.
Total in talks to buy stake in Adani’s LNG, city gas projects
French energy giant Total SA is in talks to buy up to half of Adani Group’s stake in LNG projects in Gujarat and Odisha, an under-construction LPG import facility and in its city gas projects, sources privy to the development said. The French firm is keen on investing in fast growing gas market in India and finds Adani a suitable vehicle as it owns the crucial downstream infrastructure, they said. Adani holds 25 per cent stake in just-completed 5 million tonnes a year liquefied natural gas (LNG) import terminal at Mundra. It is also building a similar capacity LNG import terminal at Dhamra in Odisha at a cost of Rs 5,100 crore. Sources said Total is in talks to buy half of Adani’s stake in the two terminals. It is also looking at buying a 50 per cent stake in under-construction LPG import terminal that Adani is building at Mundra in Gujarat as well as a stake in Adani’s flourishing city gas distribution projects, the sources said, adding that a preliminary pact may be signed this week during the visit of Total CEO Patrick Pouyanne to India. India is looking at more than doubling the share of natural gas in its energy basket to 15 per cent in next few years and is giving major push to city gas distribution projects. It imports half of its gas needs, which are projected to rise exponentially as it shifts from polluting liquid fuels to environment friendly natural gas. While an email sent to Total for comments remained unanswered, Adani Group spokesperson wasn’t immediately available for comments. While the Mundra LNG terminal has Gujarat State Petroleum Corp (GSPC) as the lead partner, Adani is building a new LPG import facility at the same port with a total capacity to 3.56 million tonnes per annum. The LPG terminal is to be completed by next month. Adani Gas, a subsidiary of Adani Enterprises Ltd, is developing city gas distribution (CGD) networks to supply the piped natural gas (PNG) to the industrial, commercial, domestic (residential) units and compressed natural gas (CNG) to the transport sector. It already has set up city gas distribution networks in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh. It has, in the recently concluded CGD bid round, won rights to 13 cities on its own and another 9 in joint venture with state-owned Indian Oil Corp (IOC). These are in addition to the 50:50 Adani-IOC joint venture winning rights to develop CGD network in Allahabad, Chandigarh, Ernakulam, Panipat, Daman, Dharwad, and Udhamsingh Nagar in previous bid rounds. Sources said Total is looking at buying half of Adani’s stake all the CGD networks. The development comes weeks after Total announced its exit from Royal Dutch Shell-operated Hazira LNG terminal in Gujarat. It sold its 26 per cent stake in the project to Shell. Total had in March 2004 picked up 26 per cent stake in the 2.5 million tonnes a year Hazira liquefied natural gas import terminal in Gujarat. The terminal capacity was later doubled to 5 million tonne. Hazira LNG terminal was commissioned in 2005 and expanded to 5 million tonnes in 2013. Shell held the remaining 74 per cent stake in the company. Total has signed an agreement to sell 0.5 million tonne LNG per year to Shell over five years, on a delivery basis to supply the Indian and neighbouring markets. The deliveries will be sourced from Total’s global LNG portfolio and are expected to begin in 2019.