China overtakes Japan as world’s top natural gas importer
China has overtaken Japan to become the world’s top importer of natural gas, as Beijing’s crackdown on pollution boosts its demand for the more environmentally friendly fuel, while the restart of nuclear reactors in Japan reduces its LNG imports. China’s total natural gas imports over January to October this year via pipeline and as liquefied natural gas (LNG) were at 72.06 million tonnes, up a third from the same period last year, according to Reuters calculations based on General Administration of Customs data. Japan, on the other hand, imported about 69.35 tonnes of LNG over that period, according to ship-tracking data from Refinitiv Eikon, down 17 per cent for the same 10 months of 2017. Japan imports all of its gas as LNG. China’s push to switch away from coal to natural gas is key to its rapid gas demand growth, said Edmund Siau, gas analyst with energy consultancy FGE. “Meanwhile, nuclear reactors continue to restart in Japan, which reduces demand for gas-fired power generation and consequently LNG demand,” Siau said. China – already the biggest importer of oil and coal – is the world’s third-biggest user of natural gas behind the United States and Russia, but it has to import around 40 per cent of its total needs as domestic production can’t keep up with demand. China still lags behind Japan on LNG imports but could overtake its North Asia neighbour in the early 2020s, FGE’s Siau said. China’s surging demand pushed it past South Korea as the world’s second-biggest LNG importer in 2017. China last year started to move millions of households and many industrial facilities from coal to gas as part of efforts to clean its skies, sparking an unprecedented rally in overseas import orders. Its three biggest LNG suppliers are Australia, Qatar and Malaysia. Pipeline imports come from Central Asia and Myanmar, and a pipeline connecting China to Russia is under construction. “China has become a hotbed of contracting activity, with many suppliers courting the large Chinese national oil companies as well as the emerging buyers for long-term contracts,” Siau said. China’s natural gas demand is expected to grow about 10 per cent next year, he said, while Japan’s gas demand will continue to fall.
Digitalisation can save oil upstream business $73 bn a year: Woodmac
Energy firms could save an annual $73 billion within five years in oil and gas exploration and production by making better use of existing computing technology, energy consultancy Wood Mackenzie said. Exploration and production, known as the upstream industry, requires energy firms to analyse huge amounts of seismic and geological data and to monitor and maintain offshore platforms and other complex assets, often in high-risk environments. In a report on how technology can be used for these tasks and potential savings, Wood Mackenzie (Woodmac) said many firms could spend less by buying technology and know-how from outside of the industry. “Start-ups that merge Silicon Valley roots and domain knowledge … may bring benefits to companies much more quickly than in-house approaches,” it said. The consultancy saw big savings from using technology that would make drilling faster, more accurate and less likely to end up with a dry well, and by using applications to predict when maintenance would be needed. Woodmac estimated the industry could save up to $12 billion a year on drilling, mostly in onshore and shallow waters. It said big savings were also available from the use of cloud computing services, particularly for smaller firms that did not have enough in-house computing power. The US shale industry, which uses a cocktail of high-pressure water and chemicals to coax crude from rock deep underground, known as hydraulic fracturing or fracking, could also offer insights to conventional drillers, the report said. In offshore drilling, where rig rates tend to drive costs, the industry overall might be able to use rigs for 2,000 fewer days through more digitalisation and automation, Woodmac said. It said average annual exploration spending of $50 billion could be cut to about $35 billion, while still boosting the discovery success rate to 45 per cent from about 35 per cent now. In addition, it estimated the industry could save as much as $24 billion a year on operating oil producing assets through better use of technology. Citing examples of firms that have effectively employed new technology, it said Norway’s Equinor estimated more automation would drill wells 15 to 20 per cent faster by 2020. Norwegian firm Aker BP had bought software engineer Cognite to digitise its assets, and was now selling software to rivals and sharing data, it said. The report also said Aker had shifted from rigid maintenance schedules to a more flexible system, while BP was using robots and drones to inspect a platform in the Gulf of Mexico.
Saudi Aramco, Abu Dhabi’s ADNOC agree to invest in gas exploration, LNG
The state petroleum producers of Saudi Arabia and Abu Dhabi on Monday signed a “strategic framework agreement” to invest in natural gas exploration and liquefied natural gas ventures. The heads of Saudi Aramco and ADNOC signed the agreement at a ceremony in Abu Dhabi.
Central Asia-China gas pipeline to hit maximum capacity: PetroChina
* China oil major PetroChina says the Central Asia-China gas pipeline will supply 160 million cubic metres of gas per day this winter, its highest ever level * The pipeline will be operating at 100 percent utilisation rate, said the company on its website on Monday * The announcement comes as China prepares to start up winter heating across the north from November 15 * Demand for gas in China surged last year leading to a shortage of supply, after a government push to switch household heating systems to gas from coal * The pipeline accounts for about 25 percent of China’s oil and gas pipeline network, it said * The Central Asia-China pipeline bring natural gas from Turkmenistan, Kazakhstan and Uzbekistan to China
Govt mulls selling 149 fields of ONGC to private companies
The government is mulling selling as many as 149 small and marginal oil and gas fields of ONGC to private and foreign companies and allow the state-owned firm to focus only on big fields, sources with knowledge of the development said. On the anvil is some kind of extension of the Discovered Small Field (DSF) bid round where discovered and producing fields of Oil and Natural Gas Corp (ONGC) are auctioned to firms offering the maximum share of output to the government, sources said. This is the second attempt by the oil ministry to take away some of the fields of ONGC for private and foreign companies. In October last year, the Directorate General of Hydrocarbons (DGH) had identified 15 producing fields with collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic meters of gas of national oil companies for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction. The plan, however, could not go through as ONGC strongly countered the DGH proposal with its own suggestion that it be allowed to outsource operations on same terms as the government plan. Sources said the current plan started as a follow up of the October 12 meeting called by Prime Minister Narendra Modi to review domestic production profile of oil and gas and the roadmap for cutting import dependence by 10 per cent by 2022. At a meeting, the ministry made a presentation showing that while 95 per cent of ONGC’s production was from 60 large fields, 149 smaller fields contributed to a mere five per cent. It was suggested at the meeting that these smaller fields could be given out to private and foreign firms and ONGC could concentrate on the big ones where it could rope in technology partners through production enhancement contracts (PEC) or technical service arrangements. Sources said thereafter a six-member committee under Niti Aayog CEO Amitabh Kant was set up to give a proposal on the same. ONGC, however, is opposed to the plan as it feels it should be allowed the same terms that the government extends to private and foreign firms in DSF. The government gave out 34 fields to private firms by offering them pricing and marketing freedom for oil and gas they produced from the fields in the first round of DSF. A second round of DSF with 25 fields on offer is currently under bidding. The fields offered in DSF were taken away from ONGC and Oil India Ltd on the pretext that they were lying idle and unexploited. But under the present proposal, the government plans to take away discovered and producing fields. Sources said ONGC feels it too should be allowed to seek revenue sharing partnership for its fields. Field operations could be outsourced to foreign or private firms that offered the highest revenue or production share over and above a baseline production. The ministry is reasoning that the areas where the fields discovered by ONGC were given to the state-owned firm on nomination basis. In the proposal that was mooted in October last year, the plan was to give out 60 per cent stake in 15 fields — 11 of ONGC and four of Oil India. These included Kalok, Ankleshwar, Gandhar and Santhal — the big four oilfields of ONGC in Gujarat. The DGH too had identified 44 fields of ONGC and OIL, which could take on partners for production enhancement work where bidders would get the ‘tariff’ that they bid as a return for increasing the output ‘over the baseline production’ for an initial period of 10 years. The oil ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms would help raise output as they can bring in technology and capital, sources said. It has been tasked by the prime minister to cut dependence on oil imports by 10 per cent by 2022 over 77 per cent in 2014-15. But, the dependence has only increased and is now over 83 per cent. The privatisation is repeat of the infamous round in 1992-93 when medium sized discovered fields like Panna/Mukta and Tapti oil and gas field in the western offshore was given to now defunct Enron Corp of the US and Reliance Industries Ltd (RIL). As many as 28 fields were then awarded. Under this regime, ONGC was made licensee and given an option to farm in 40 per cent of stake. The controversial privatisation under the then oil minister Satish Sharma had resulted in an inquiry by the Central Bureau of Investigation.
Oil exporters discussed proposal for supply cut next year, Kuwaiti official says
A meeting of major oil exporters in Abu Dhabi has “discussed a proposal for some kind of cut in (crude) supply next year”, state-run Kuwait News Agency KUNA on Monday cited a Kuwaiti oil official as saying. It said the proposal did not specify the volume of the cut, according to Kuwait’s governor to the Organisation of Petroleum Exporting Countries (OPEC), Haitham Al-Ghais. Sunday’s meeting was attended by OPEC and non-OPEC countries with several oil ministers still in Abu Dhabi on Monday, including Saudi Arabia’s Khalid al-Falih.
India to lease out half of Padur strategic oil storage to ADNOC
India plans to lease out half of its Padur strategic oil reserve site in southern India to Abu Dhabi National Oil (ADNOC) for storing crude, sources said. Indian Strategic Petroleum Reserves Ltd (ISPRL) will sign an initial agreement with ADNOC on Monday in the presence of oil minister Dharmendra Pradhan, three sources with direct knowledge of the matter said. The agreement will allow ADNOC to sell oil to local refiners but give the government of India the first right to the oil in the case of an emergency. It will be the second such deal with ADNOC, which is already storing oil at the Mangalore strategic storage in Karnataka. “We will sign a memorandum of understanding with ADNOC to fill two compartments in Padur along the same lines as the Mangalore cavern,” said one source with direct knowledge of the matter, declining to be named ahead of an official statement. In return for allowing ADNOC to store its crude at a strategic reserve site, India does not have to pay for the imports, only accessing the oil in emergencies. India’s oil ministry and ISPRL, a government entity that builds the caverns, did not respond to Reuters’ request for comments. An ADNOC spokesman said: “We are already working with India’s ISPRL in Mangalore and we hope to build on this positive working relationship in the future.” India’s cabinet last week approved a plan allowing foreign oil companies to store oil in Padur’s strategic storage. “Participation by foreign oil companies will significantly reduce budgetary support of government of India by more than 100 billion rupees ($1.38 billion) based on current prices,” Law Minister R. S. Prasad told a news conference last week. The Padur site is located about 5 km (3 miles) from the southwest coast and 40 km from Mangalore Refinery and Petrochemicals Ltd’s refinery. India relies heavily on oil imports, which account for about 80 per cent of its total demand. To protect itself from potential supply disruptions, it has built emergency storage in underground caverns at three locations, with a capacity to hold 36.87 million barrels of crude, or about 9.5 days of its average daily demand.
Rosneft’s Middle East Strategy Explained
Where some see hardship, others see opportunity. Russia’s most valuable export products are oil and gas of which the top producers are Rosneft and Gazprom, respectively. The latter’s dominant position on the European gas market has put it in the spotlight as a foreign policy tool of Moscow after the crisis in Ukraine and the annexation of Crimea. Rosneft, on the other hand, has had fewer setbacks while propping up its engagement in multiple countries on several continents. The impact of these deals could have a far-reaching effect on the global energy market and domestic politics. One of the regions of attention is Iraq’s northern Kurdistan area where Rosneft CEO Igor Sechin has made several important deals, cementing the company’s position. With preparations underway to start extracting oil, Bagdad has voiced its discontent concerning Rosneft’s activities. Rosneft’s balancing act As Russia’s largest oil producer, Rosneft is a highly valuable company. The Russian state owns 50.00000001% of its shares while Sechin also maintains close personal relations with President Putin. The Kremlin has not been shy to exert control over the energy company. While this doesn’t mean that Rosneft isn’t a commercial organization, Moscow’s foreign policy objectives have been taken into consideration. The energy company has to walk a fine line between the Russian state’s interests and its commercial opportunities. For a regular company, this would be a hard task. However, the backing of the Russian government gives Rosneft some advantages over its competitors. The company has lent $6 billion to Venezuela where it could end up owning Texan refineries currently in the possession of Venezuelan PDVSA because the assets are collateral against the debt. In India, Rosneft has invested $13 billion in a refinery which was above the market price but the company was required to outbid Saudi Aramco in order to cement Russian, Indian ties. Arguably Rosneft’s deal with the Kurdish Regional Government or KRG in Northern Iraq has the most potential in terms of political and financial dividend. The KRG’s independence referendum in the fall of 2017 was a fiasco. During the crisis, Bagdad regained control over the significant oil fields near Kirkuk and nullified hopes for Kurdish independence. At the height of the crisis, when Secretary of State Rex Tillerson was trying to defuse tensions, CEO Igor Sechin was busy negotiating the acquisition of the Kirkuk-Ceyhan pipeline. Instead of easing tensions, Sechin doubled down in a letter to Bagdad in which he stated his support for the Kurds which showed “a higher interest in expanding strategic cooperation”. The deal to transfer control over the pipeline and several oil fields was struck on October 20th, 2017 at the height of the post-election chaos. Iraq’s weakness and opportunities Bagdad opposes any deal the KRG strikes without the consent of its parliament. Rosneft, however, maintains the right to engage with the Kurds according to the existing power-sharing agreement between the central government and Erbil. The meeting between Iraqi oil minister Jabar al-Luaibi with Sechin’s right-hand man Didier Casimiro in Bagdad in April was a sign of acquiescence by the central government. Despite its discontent, Bagdad prefers to maintain good relations with Russia for several reasons. First, Moscow in recent years has acquired a formidable position in the Middle East by maintaining good diplomatic relations with all regional actors. Second, the Coordination and Information Centre set up in September 2015 by Russia, Iran, Iraq, and Syria in Bagdad to coordinate the fight against ISIS, has also functioned as a trust sharing platform. Furthermore, Iraq is the second largest importer of Russian arms after India. From a strategic point of view, Bagdad’s relations with Moscow provide it with a highly needed balance against the two other important foreign actors in Iraqi politics: Iran and the U.S. Although Russia cannot provide financial and political support on the same level as Washington or doesn’t share the same cultural and religious background as neighboring Iran, Moscow is able to provide strategic balancing if required. Moscow’s green light Besides oil, natural gas is also a topic the KRG and Rosneft are discussing. A pipeline could provide Turkey and Europe with an additional source of energy. Gazprom in Russia has a monopoly concerning the export of gas through pipelines. The opening of the Iraqi gas market could go at the expense of Gazprom’s market share in Turkey and Europe. Moscow has on several occasions intervened to confirm the Russian gas giants monopoly vis-à-vis pipeline exports. The Kremlin, however, has remained silent concerning Kurdish gas. Its muted acquiescence is based on maximizing financial dividends and increasing or at least maintaining, political influence in Europe. The opening of a second ‘Russian controlled gas corridor’ from Iraq could possibly go at the expense of Gazprom’s market share. However, relatively expensive LNG imports could be hit even harder. Furthermore, the KRG could prefer Rosneft constructing and exploiting the pipeline as the company has supported the regional government during the past year while other governments and companies have kept their distance.
The BOC Group offers to delist Linde India, take full ownership of firm
The BOC Group Ltd, promoter of Linde India Ltd, has offered to take full ownership of the company and delist the firm from the country’s bourses. This follows as a result of the global merger between Linde AG and Praxair Inc, whereby Linde Plc has acquired control and voting rights of Linde AG. The BOC Group is part of the Linde Group and owns 75 per cent equity in Linde India. In a notice to the BSE, Linde India said that the primary objective of making the delisting offer is to obtain full ownership of equity shares of this company by the promoters. This will provide the promoter group with operational flexibility to support the business and future financing needs. Moreover, ongoing expenses with the maintenance of listing on BSE and NSE will be reduced, including investor relations expenses, and the management can dedicate its full time and energy to focus solely on the business. Moreover, for a non-listed entity, time dedicated to compliance with listing requirements gets reduced. About delisting from the bourses, a letter written by Andrew Brackfield, director at The BOC Group, reasoned that according to Securities and Exchange Board of India (Sebi) regulations, 25 per cent of the equity share capital of a company is required to be held by public shareholders. “In the event any public shareholder subscribes to the open offer, the promoter group’s direct and indirect (as applicable) shareholding in the company post the completion of the aforementioned open offer will exceed 75 per cent of the equity share capital of the company and could be as much as 100 per cent in case the open offer is fully subscribed,” the letter read. According to this letter, the promoter group, thus, will have to consider divesting the excess shareholding in the secondary market in a time-bound manner within 12 months of the completion of the open offer. “Therefore, the promoter group believes that a delisting proposal is a quicker and more cost-effective way for the promoter group to comply with SCRR, Sebi LODR,” Brackfield said. Linde India’s board has already appointed ICICI Securities as the merchant banker for carrying out the due diligence process. According to The BOC Group, the delisting price will be determined in accordance with the reverse book building process in the manner specified in the delisting regulations after the fixing of the floor price. “The floor price is not a ceiling for the purpose of the reverse book building process and the public shareholders may offer their respective shares at any price higher than floor price,” the letter added. Linde India shares closed at Rs 582.65 apiece, surging by 20 per cent, on the BSE.
Shale cash gusher sees EOG join oil’s $1 billion-a-quarter club
The well-heeled, buttoned-down world of international oil now has competition from cowboy boots and jeans. EOG Resources Inc.’s $1.1 billion in third-quarter adjusted net income vaulted the biggest American shale driller into the same league as Italian oil giant Eni SpA, ConocoPhillips and Occidental Petroleum Corp. and ahead of Spain’s Repsol SA. But there’s one major difference: EOG is growing production at more than 20 percent a year. Those veteran operators build multibillion-dollar engineering marvels around the world, have government ministers on speed dial, and operate myriad assets on several continents. It’s not a club typically associated with scrappy shale wildcatters, better known for burning through investors’ cash as quickly as they can drill a well in a Texas dust bowl. “The period of systematic outspend might be over,” said Irene Haas, a Houston-based analyst at Imperial Capital Group LLC. “EOG is there already but in 2019 a lot of companies are going to be hitting a point where they’re generating pretty substantial cash flow.” EOG, which hasn’t topped the billion-dollar profit mark in a decade, appears to have reached a sweet spot of surging production and free cash flow. Dividends are up 31 percent this year. At a time when West Texas Intermediate currently trades at about $60 a barrel, EOG says its new wells provide 30 percent after-tax returns with oil as low as $40. EOG, which once stood for Enron Oil & Gas, is not alone. Continental Resources Inc., Pioneer Natural Resources Co. and Devon Energy Co. also generated considerable free cash flow in the third quarter. Conoco and Occidental have also made shale one of their key investment targets. Permian legend Mark Papa, who was a pioneer of U.S. shale as EOG’s CEO from 1999 to 2013, said in an interview last month that he never expected the country’s production to grow as fast as it has: “Not in our wildest dreams did we think it was going to turn out to be numbers like it turned out to be.”