Private buyers of Iran crude had no problems exporting it: Oil minister
Private buyers of Iranian crude have had “no problems” exporting it, Iran’s oil minister was quoted as saying on Wednesday by state news agency IRNA, despite US sanctions targeting Iran’s oil exports. Iran began selling crude oil to private companies for export in late October, just ahead of US sanctions on sectors including oil which came into effect on November 5. “Those who bought oil on the bourse have been able to export and there have been no problems in this regard,” IRNA quoted Oil Minister Bijan Zanganeh as saying.
Petroleum price spike and crash: The crisis that wasn’t
Low oil prices were the biggest economic windfall for the Narendra Modi led NDA government when it assumed office in May, 2014. The average price of India’s crude oil basket (COB) fell from $106/barrel to $46/barrel between 2013-14 and 2015-16. This allowed the government to reap fiscal gains without having to worry about inflation. An analysis by TaditKundu published in Mint showed that almost the entire reduction in fiscal deficit in the first half of the present government’s tenure was due to the fiscal gains from petroleum taxes. This scenario changed drastically in the middle of this year. An interest rate hike by the US Federal Reserve, an economic recovery in advanced countries, and the US re-imposing trade sanctions on Iran led to a spike in crude oil prices. This also triggered a fall in the rupee’s value vis-à-vis the dollar. Between January and October this year, the price of petrol increased 20% reaching an all time high of Rs 84/litre in Delhi, triggering speculation of it even reaching triple figures. Politically, the timing could not have been worse for the Bharatiya Janata Party (BJP), as the spike came just before the crucial election cycle in the Hindi belt states. Under pressure to reduce petroleum prices, the Union government announced a cut in excise duties on petrol and diesel. This triggered speculation of a slippage on the fiscal front, and had crude prices continued to rise, that would have been a certainty. However, a moderation in oil prices diffused a major crisis. India’s COB price fell from $80/barrel in October 2018 to $65/barrel in November 2018. Petrol prices in Delhi on 24 December were the lowest this year at Rs 69.86. To be sure, the rupee-dollar exchange rate is still worse than what it was in the beginning of the year. However, given the low oil prices, its favourable impact (in terms of making exports competitive) will probably outweigh the inflationary effects (via petroleum imports) for now.
Milestones unmet, Nikhil Merchant’s Swan asks govt oil firms to ease norms
In a letter dated October 13, Swan’s special purpose vehicle Swan LNG Private Ltd wrote to users Indian Oil Corp, Oil & Natural Gas Corp, Bharat Petroleum and Gujarat State Petroleum Corp to consider fixing the project’s “Effective Date” as December 8, 2016. Rejected once and unable to meet key milestones, including financial closure, even 17 months after deadline, Swan Energy Ltd, promoted by influential Gujarat businessman Nikhil Merchant, has asked state-run oil companies to give him a fourth extension. And approve a new commissioning date of March 2020 for its proposed LNG regasification terminal at Jafrabad in Gujarat. The Rs 5,117-crore plant is meant to convert LNG, imported by these firms, into its gaseous form so that it can be piped to domestic end-users. At a capacity of 5 million tonnes, it will bring Swan an annual revenue of an estimated Rs 14 billion. In a letter dated October 13, Swan’s special purpose vehicle Swan LNG Private Ltd wrote to users Indian Oil Corp, Oil & Natural Gas Corp, Bharat Petroleum and Gujarat State Petroleum Corp to consider fixing the project’s “Effective Date” as December 8, 2016. As per the agreement between Swan and these four firms, commissioning of the plant is envisaged 33 to 39 months from the Effective Date — which means the four have to decide on their overseas LNG suppliers and tie up with their domestic natural gas buyers by March 2020. The four are yet to reply to the October letter but a similar request made by Swan on September 1 was turned down at a joint meeting of the four companies on September 21. Their argument: Effective Date should be when the project achieves financial closure and all key conditions met. Swan attributed its delay in financial closure to “recent unwanted developments i.e. banking frauds, high NPAs, weak capital levels with public sector banks”. But the four firms argued that they would suffer either way if the commissioning was set for March 2020: they have to start using the terminal by then or pay “Use or Pay” charges. That would entail paying 75 percent of the tolling charge (Rs 57.38 per million British thermal units) even without using the terminal. Also, they would have to tie up with both the LNG supplier and buyers in anticipation of Swan’s readiness. And, in case of further delay by Swan, they would end up paying a penalty to both. “In case Swan is unable to obtain financial closure in the coming months, the User’s liabilities will not only be towards ‘Use or Pay’ to Swan LNG but also to the LNG supplier under ‘Take or Pay’ clause ($8-$9 per mBtu) and regassified LNG buyer under ‘Supply or Pay’ clause ($9-$10 per mBtu),” they warned. That’s why, the firms argued, the “effective date” should be when Swan LNG notifies in writing that it has achieved all six pre-conditions, including financial closure. And decided to give Swan LNG time until December 31 to satisfy all pre-conditions as requested on September 1. Swan was to achieve all key pre-conditions by June 23, 2017 — a year after signing of the regassification agreement with the foundation users. When contacted, Swan Energy Managing Director Nikhil Merchant told The Indian Express that Swan LNG had achieved financial closure for a part of the project. He claimed that contract for port facilities had been since awarded and the tie-in for regassified LNG transporter was the foundation users’ responsibility. On his request for a new Effective Date, Merchant said that it should be considered on the basis of the letter of intent issued by the Gujarat Maritime Board which has granted space for the project. “The Concession Agreement (issued by GMB) supersedes all agreements and therefore this should be considered for the effective date,” he said. Swan LNG’s letter, however, said that if the users insisted on fulfilment of each of the conditions, the commissioning date would have to be postponed to mid-2021. The four companies had thrown their weight behind Swan’s proposed terminal by signing agreements on June 23, 2016 to use the proposed terminal to bring in their own LNG and get it converted into gas by paying Swan a tolling fee of Rs 57.38 per mBtu. While ONGC, IOC and BPCL have each taken 1 million ton capacity in the proposed plant, GSPC has booked 1.5 million tons.
Petronet LNG to invest Rs.21 billion at Dahej terminal
Petronet LNG Ltd, India’s top gas importer, plans to invest Rs.21 billion to expand its terminal capacity in Dahej, Gujarat, from 15 million tons per annum (MTPA) to 20MTPA in the next two or three years, said two officials close to the development. Of the total, Rs.13 billion would be used to expand the Dahej terminal, while Rs.8 billion will be spent on building LNG storage tanks, they said, requesting anonymity. Petronet LNG, which built India’s first LNG receiving and regasification terminal at Dahej, operates another terminal in Kochi. The Kochi terminal has a capacity of 5 MTPA. The company is in the process of building a third terminal, at Gangavaram, Andhra Pradesh. An investment proposal for the expansion in Dahej has been recently submitted to the Gujarat Maritime Board—the regulator for all the non-major ports and maritime activities in Gujarat, confirmed a senior Gujarat government official, who did not wish to be named. A Petronet LNG official declined to comment. A company official did not respond to an emailed query. As a precursor to the ninth Vibrant Gujarat Global Summit, scheduled during 18 to 20 January in Gandhinagar, GMB had organized a road-show in Mumbai on 21 December. The road-show was aimed at highlighting the competitive strength of Gujarat and attracting investments in the state’s maritime sector, said a GMB official, requesting anonymity. “The investment proposal by Petronet LNG shows that Gujarat is still a leader when it comes to fresh investments,” the official said. Prime Minister Narendra Modi had in October inaugurated a LNG terminal promoted by GSPC LNG Ltd, a subsidiary of Gujarat State Petroleum Corp. Ltd. The project is the third such LNG re-gasification project in the state after Petronet LNG’s Dahej LNG terminal and the Hazira project of Shell Gas BV, a unit of Royal Dutch Shell Plc. Shapoorji Pallonji group and Swan Energy have also announced plans to set up LNG terminals in Gujarat. Consumption of natural gas in India has increased by 17.1% on a year-on-year basis during FY19 (April-October period), Care Ratings said in a 19 December report. Increase in demand and fall in domestic production has led to an increase in imports of LNG by 12.7%. In the current fiscal year, India imported LNG mainly from Qatar (47%), Nigeria (17%), the US (6%), Angola (6%) and Australia (6%). R-LNG or re-gasified-liquefied natural gas has catered to 47% of the natural gas consumption during the April to October period. While Petronet’s Dahej terminal has a long-term LNG sourcing contact with RasGas, and with ExxonMobil for the Kochi Terminal, GAIL’s Dhabol terminal has a 20-year contract with Cheniere Energy. Hazira LNG has sourced cargoes from 17 liquefaction facilities across the globe, ranging from Peru LNG at the extreme west to Sakhalin LNG in the extreme east. Unlike Dahej, Kochi and Dhabol, Hazira terminal is geared more towards short and mid-term contracts instead of long-term. “India is scheduled to add 27.5 million metric tonnes per annum additional R-LNG terminal capacity in the coming few years depending on the techno-feasibility of the project. The current regasification facilities are all located on the west coast of the country. With the proposed new plants which will be set up on the east coast of India, the disparity in the supply of LNG should diminish,” adds Care Ratings.
Kuwait light crude output expected to rise to 250,000 bpd in 3 years
Kuwait’s production of light crude is expected to rise to 250,000 barrels per day in three years’ time and to 300,000 bpd by 2023, Ali Hussain Al-Kandari, manager of production and projects at Kuwait Oil Company said on Tuesday. Light crude output is currently 180,000 bpd, with natural gas at 0.5 billion cubic feet, Kandari said in remarks carried by the state news agency.
World’s largest floating LNG platform starts production in Australia
Royal Dutch Shell said on Wednesday it has begun output at its Prelude floating liquefied natural gas (FLNG) facility in Australia, the world’s largest floating production structure and the last of a wave of eight LNG projects built in the country over the last decade. Though the project started up later and cost more than originally estimated, it is expected to further cement Australia’s lead as the world’s biggest LNG exporter, after the country took the crown in November. In a statement, Shell said wells have now been opened at the Prelude facility, located 475 kilometres north-north east of Broome in western Australia. This means Prelude has now entered start-up and ramp-up, the initial phase of production where gas and condensate – which is an ultra-light form of crude oil – is produced and moved through the facility. Prelude is expected to have an annual LNG production capacity of 3.6 million tonnes, 1.3 million tonnes a year of condensate and 400,000 tonnes a year of liquefied petroleum gas (LPG). Shell did not immediately respond to a Reuters query on when first LNG will be exported from the facility, but analysts estimate exports to start by early next year, with condensates likely to start first. “First LNG cargo is still several weeks assuming all proceeds as planned, but the timing of first cargo and pace of ramp-up is still subject to technical risk,” said Saul Kavonic, energy analyst at Credit Suisse in Sydney. “Given Prelude’s novelty, geographic conditions and challenges, it may be subject to greater risk to timeline from wellhead production to first cargo than an average LNG project,” he said. “We expect Shell to seek to get it done right, rather than rush things.” Shell owns 67.5 percent of the project, while Japan’s Inpex Corp, Taiwan’s CPC Corp and Korea Gas Corp hold the rest of the shares. Australia overtook Qatar as the world’s largest exporter of LNG for the first time in November, after the start-up of a number of export projects over the past three years, most recently the Ichthys facility. The start-up of Prelude, following the ramp-up in production at Ichthys and Russia’s Yamal LNG is expected to put pressure on the Asian market next year, said Kittithat Promthaveepong, a senior analyst at FGE.