Next-wave LNG race hits hurdles in US-China trade war
The delay of a US Gulf Coast liquefied natural gas (LNG) export project has crystallized fears that the US trade battle with China is hampering efforts to line up buyers needed to move ahead with multi-billion-dollar builds. The United States is positioning itself as the dominant provider of the supercooled fuel as Asian nations shift away from dirtier power sources like coal, and this month’s approval of a giant Canadian project led by Royal Dutch Shell bolstered enthusiasm for the sector overall in North America. That optimism took a hit on Monday, when Australia’s LNG Ltd delayed until next year a planned decision on whether to build its Louisiana-based Magnolia LNG plant due to problems lining up Chinese customers. And it comes when bankers and analysts in the sector had already questioned whether the next wave of projects in the pipeline would pass muster with investors. “Chinese LNG demand growth is the largest piece of demand growth out there, and Chinese buyers have got to feel reluctant to commit to US capacity when the US government sees trade as a means of exerting political leverage,” said Bob Ineson, managing director of North American natural gas at IHS Markit. China set a 10 per cent tariff on US LNG imports last month, extending a trade scuffle in which US President Donald Trump imposed tariffs on $250 billion worth of imported Chinese goods and China retaliated with duties on $110 billion worth of US goods. China’s LNG demand has skyrocketed in recent years on Beijing’s pollution crackdown, with imports nearly tripling since 2015. Last year it overtook South Korea as the world’s No. 2 importer of LNG. That boom, along with rising demand from other Asian nations, has helped gobble up an anticipated LNG glut and boosted spot prices to near four-year highs, breaking a multi-year freeze on new project investment. By the mid-2020s, global LNG demand is forecast to range from 360 million to 450 million tonnes, up from about 290 million tonnes in 2017. With China leading that growth, signing deals with its companies is viewed as imperative to get larger projects done. But the tariffs are having a chilling effect, according to two US industry sources. China is not signing any long-term deals with US projects until the spat is resolved, they said. That’s not good news when there are at least six other new builds or expansions in North America on the cusp of a construction decision, with a handful more eyeing go-aheads by 2020, representing more than $100 billion worth of potential construction. The first wave of US LNG projects was able to leverage underutilized infrastructure and cheap gas to get a foothold in what had been a closely held global market. But second-wave newcomers like Tellurian Inc, NextDecade Corp and Venture Global LNG face a range of challenges from financing to contract pricing to pipeline access, experts told Reuters. With so many horses in the race, big builds backed by established players or expansions of existing export facilities will likely fare better than upstarts. This favors energy giants like Shell, Exxon Mobil Corp and Qatar Petroleum, all of which have projects in the works, along with Cheniere Energy, the leading independent US LNG company. Shell and its partners this month approved the C$40 billion ($31 billion) LNG Canada mega project, promising 14 million tonnes per annum of new capacity before 2025, with the option to double that output. “My instinct would tell me that the larger companies have the resources and relationships to get these things approved, because they’re just enormous projects,” said Charlie Cone, an LNG analyst with energy data firm Genscape. LNG Canada’s chief executive, Andy Calitz, said last week that US rivals could end up “dead in the water” as long as China keeps its tariff on US imports. That could be a boon for Canada’s tiny Woodfibre LNG on the west coast and Pieridae Energy Ltd’s Goldboro LNG on the east coast. Non-Chinese buyers are also cautious about long-term deals due to changing trade policy, said IHS’s Ineson. “This conflict could lead to many developers of US-based projects missing this window,” he said.
Shapoorji Pallonji, Royal Vopak to set up LPG terminal in Gujarat
The Shapoorji Pallonji Group has tied up with Dutch firm Royal Vopak to build a Rs. 14 billion import terminal and storage facility for liquified petroleum gas (LPG) and oil products near Junagadh, in Gujarat, said two executives aware of the development. SP Ports Pvt Ltd, a part of Shapoorji Pallonji Group, and Vopak India BV, a subsidiary of Royal Vopak, plan to jointly execute the project at Chhara-Sarkhadi near Junagadh through their joint venture West Coast Liquid Terminal Pvt. Ltd (WCLTPL), the people mentioned above said on condition of anonymity. The terminal and storage facility will be housed at a port in Chhara-Sarkhadi being built by Simar Port Pvt. Ltd, a Shapoorji Pallonji Group company. “The terminal is being planned considering the increasing demand for LPG in India. The initial capacity of the terminal could be up to 5 million tons per annum (mtpa) with an expandable capacity of 10 mtpa,” said one of the executives cited above. LPG demand in India has risen after the introduction of the Pradhan Mantri Ujjwala Yojana (PMUY). India added 11.53 million new domestic LPG customers between April and June 2018, according to the petroleum planning and analysis cell, the data arm of the ministry of petroleum and natural gas. The terminal will import LPG, petroleum products, oil products and vegetable oil, and will have a storage and distribution terminal along with a jetty within the port, according to project details submitted to the Gujarat government. The project will require about 98 acres. The maximum throughput envisaged is 10 million metric tons per annum. Royal Vopak is the world’s leading independent tank storage company. Liquid propane, butane and LPG will be imported by using very large gas carriers and later heated, blended and dosed with odorant to make LPG for distribution via trucks and pipelines. Petroleum, oil and lubricants will be imported by using ocean moving petroleum oil tankers and distributed through trucks. Vegetable oil will be imported through ocean moving vegetable oil tankers and distributed by using trucks. Refrigerated propane and butane will be received through ships and will be first stored in refrigerated, full containment double walled storage tanks separately. They will then be heated, pumped to mounded tanks and stored separately. Pressurised propane and butane will be transferred to static mixer for blending and making the mixed LPG. Pressurised propane, butane and mixed LPG will be dispatched from terminal through road tankers and through pipelines. POL and vegetable oils will be received in the terminal through ships. WCLTPL has identified Chhara Port as its depth is suitable for large vessels. The port also has sufficient land to develop the proposed LPG and liquid terminal. A dedicated jetty will be developed for unloading propane, butane, LPG and liquid products. The optimum size of vessels operating at the proposed jetty would be 1,00,000 dead weight tonnage. The Shapoorji Pallonji Group said, “The group continuously explores various opportunities for its businesses. On the details sought, we do not wish to respond to market speculations and have no comments to offer.”
BPCL to invest $800m in Mozambique LNG project
Indian oil and gas firm Bharat Petroleum (BPCL) is reportedly set to invest $800m as equity in the Mozambique Rovuma Offshore Area 1 liquefied natural gas (LNG) project. The investment represents BPCL’s largest investment in an upstream project overseas, thehindubusinessline.com reported. The company holds a 10% interest in the Rovuma Offshore Area 1 concession, which is located within the Rovuma Basin. BPCL acquired the 10% stake for $703m. Anadarko Petroleum is the field operator with an ownership of 26.5%. Other participants in the project include Mitsui E&P Mozambique Area 1 (20%), Empresa Nacional de Hidrocarbonetos (ENH) (15%), ONGC Videsh (OVL) (10%), BEAS Rovuma Energy Mozambique (BREML) (10%), and PTTEP Mozambique Area 1 (PTTEP MZA1). The partners expect to make a final investment decision (FID) during the first half of next year. “We are hoping that the FID will happen sometime next year in the first half or second half.” Approximately 75 trillion cubic feet of natural gas has already been discovered in the project area, which comprises the Prosperidade and Golfinho/Atum complexes, as well as onshore LNG infrastructure in the Cabo Delgado province in northern Mozambique. The consortium partners are developing an initial onshore LNG project comprising two LNG trains with an aggregate nameplate capacity of 12.88 million tons per annum (Mtpa). An unnamed BPCL executive told the publication: “Assuming that the project cost is going to be somewhere around $20bn, we are anticipating that 33%-37% will be equity and the balance would be debt. “Once that is finalised, we are good to reach the FID stage. We are hoping that the FID will happen sometime next year in the first half or second half.” To make the FID, the partners need to achieve certain milestones, including signing long-term LNG sale and purchase agreements (SPA) for at least 9Mtpa. Earlier this month, Japan’s Tohoku Electric reached an agreement to purchase up to 0.28Mtpa of LNG from the project. Construction of the project is anticipated to begin by the end of next year, while the first LNG is expected by 2023.
India stages roadshow in UK to attract investors for oil, gas sector
India has reached out to UK-based investors to attract international public-private-partnerships (PPP) in the country’s oil and gas sector with a roadshow in London. The Ministry of Petroleum and Natural Gas, along with the Directorate General of Hydrocarbon (DGH), held an interactive session on Monday which attracted around 125 participants. The session was aimed at sharing the new policy and regulatory regime in India and details of investment opportunities in the field of oil and natural gas exploration and production (E&P). “India is a bright spot in the world economic order, where demand for petroleum products is on the rise. The primary energy demand of the country will almost double in the next 12 years. This roadshow is a call to involve international partners in this journey,” said HPS Ahuja, CEO and Managing Director of Indian Strategic Petroleum Reserves Limited (ISPR). Earlier this year, Petroleum and Natural Gas Minister Dharmendra Pradhan had launched Bid Round-II under Discovered Small Field Policy (DSF) and Open Acreage Licensing Policy (OALP) for competitive bidding. Under OALP Bid Round II, 14 blocks will be offered with a total area of 29,233 sq km and under DSF Bid Round II, 25 contract areas are on offer covering 59 discovered oil and gas fields, spread over 3,000 sq km, the ministry said. The DSF-II and OALP-II Bid Rounds are aligned to India’s Hydrocarbon Exploration and Licensing Policy (HELP), which adopts the Revenue Sharing Model in an effort to improve ease of doing business in India’s E&P sector. “It comes with attractive fiscal terms like reduced royalty rates and no cess, single license for all hydrocarbons, pricing and marketing freedom, freedom to exploration throughout contract period, no signature bonus and provision for sharing of common facilities,” the ministry said in a statement. Manish Singh, Minister (Economic) at the High Commission of India in London, inaugurated the Investment Promotional Event for Exploration and Production Opportunities in London, which was chaired by VP Joy, Director General, DGH. Besides a presentation for UK investors on the various opportunities in store, an overview of the Indian taxation regime was provided by KPMG – as knowledge partners. Under Phase I SPR, ISPRL said it has successfully created 5.33 MMT of crude oil inventory storage installations in underground mined rock caverns at three locations namely Visakhapatnam (1.33 MMT), Mangalore (1.5 MMT) and Padur (2.5 MMT). In line with the integrated energy policy of the Indian government, which calls for 90 days’ reserves, the Union Cabinet accorded “in principle” approval for Phase-II SPR programme, which involves the creation of additional 6.5 MMT of storage inventory entailing underground mined rock cavern storages and associated facilities at Chandikhol, Odisha (4.0 MMT) and Padur-II, Karnataka (2.5. MMT). “In order to explore feasibility of commercialisation of the Phase I SPR at Padur (2.5 MMT) and the planned Phase II SPRs at Chandikhol, Odisha (4.0 MMT) and Padur II, Karnataka (2.5 MMT), it is planned to solicit investment partners and pursue the initiatives of Phase II SPRs through PPP mode of implementation for construction, filling, and operation respectively and also filling and operation of the existing Phase I SPR at Padur,” ISPR said in a statement. It added: “Since India has the second-largest refining capacity in Asia and fourth-largest in the world, these storage inventories would offer a unique opportunity for various stakeholders and investors including construction companies, financing institutions, trading firms, developers, oil & gas companies etc to explore the possibility of participating in the process. “Given the vantage coastline of India, the storage locations fall on the transhipment routes of crude oil from the Middle East source countries to the Far East consuming nations.” Based on the response of investors around the world, a suitable PPP model will be prepared for international competitive bidding by an individual organisation or through joint venture partners.
Centre contemplating bringing petrol, diesel under GST: Athawale
The Narendra Modi government is contemplating to bring petrol and diesel under the ambit of Goods and Services Tax (GST), Union Minister Ramdas Athawale said here. “We have done so much work, but there is some problem pertaining to petrol and diesel prices. The issue persists even though the prices have fallen a bit. But the Centre is contemplating to bring petrol and diesel under the ambit of GST,” the Union Minister of State for Social Justice and Empowerment said at a news conference here. “If petrol and diesel are brought under GST, it will help bring down their prices by Rs 20-30, which will provide relief to people of this country including the middle class and common masses,” he added. Athawale said the states should also cut the taxes on petrol and diesel to provide some relief to people. In the past, the opposition parties have demanded that petroleum products be brought under GST. Asked about the Congress pointing fingers at the Modi government over the Rafale jet deal, Athawale said, “There is no corruption involved. The Congress and Rahul Gandhi are spreading lies.” Athawale also defended the Centre’s decision to send CBI Director Alok Kumar Verma and his deputy, Special Director Rakesh Asthana on leave. “Under such circumstances, how could the government have kept such officers in office. Had the government not sent them on leave, then the Congress would have said why no action was taken. When we took action then they are speaking otherwise. The Congress is looking to hold a protest on every issue,” he said. On Friday, the Congress, led by its president Rahul Gandhi, staged protests outside CBI offices across the country against the Centre’s decision. Speaking about the next year’s general election, the Republican Party of India (RPI-A) leader claimed the NDA will win over 400 seats in the Lok Sabha elections, while the Congress will not bag more than 70. “The BJP will increase its tally to 300-plus seats in the Lok Sabha and overall the NDA will get over 400 seats,” he claimed. “We will go to people on the basis of the work the NDA government has done. Rahul Gandhi is practising a lot for the 2019 match, but the Congress cannot score beyond 60-70 runs, I mean they cannot get more than these many seats,” he said. The Union minister said the BJP will win comfortably in Madhya Pradesh and Chhattisgarh. The two states go to polls next month. In Rajasthan, where polling will be held on December 7, he said though there is a tough fight, the NDA will win. Athawale reiterated his demand for raising the reservation for the economically weak sections of all castes to 75 per cent from the existing around 50 per cent, with an additional 25 per cent quota in government jobs and colleges. He said he has always demanded reservation for economically backward classes from all castes, be it Jats in Haryana, Patels in Gujarat, Marathas in Maharashtra or Brahmins. “The reservation given to SCs, STs and OBCs should remain intact, but there are many other castes who are also demanding reservation..25 per cent reservation should be for these castes,” he said. He added his party wants the government to bring a bill in this regard in Parliament. Athawale claimed granting reservation to others will also help bring down the atrocities against Dalits. “One of the reasons for atrocities against Dalits is that they are getting the benefit of reservation, while the others are feeling left out,” he said.