Govt allows export of biofuels from special economic zones, EoUs
The government has allowed export of biofuels from special economic zones (SEZs) and export-oriented units (EoUs) with certain conditions, according to a notice of the directorate general of foreign trade. In August 2018, the government imposed restrictions on export of biofuels for non-fuel purposes. After this restriction, exporters operating from SEZs and EoUs made representations to remove this prohibition stating they only use imported material for export of final product. They also informed government authorities that SEZ units have been granted letter of approval for export of biofuels and EoU units have obligations to fulfil under an export promotion scheme. “Considering the hardship faced by the trade community and the fact that production of biofuels in EoU/SEZ would be from imported feedstock, therefore, it would not impact the domestic production/consumption. Hence, the restriction as applicable to DTA (domestic tariff area) may not be extended to EoU/SEZ,” the DGFT notice said. SEZs and EoUs are export-oriented units outside the ambit of domestic customs laws. “Members of trade and industry are informed that export of biofuels for non-fuel purposes from EoU/SEZ will be regulated” under certain rules of SEZs and foreign trade policy, it added. It said that the feedstock for production of biofuel for export from these areas should be from imported sources only. biofuels include ethyl alcohol, petroleum oil and oils obtained from bituminous minerals, bio-diesel and mixtures. Before August 2018, exports of these items were allowed without any restrictions. India exported ethyl alcohol worth $276.35 million in 2017-18 as against $224 million in the previous fiscal. Similarly, export of petroleum oil and oils obtained from bituminous minerals increased to $8 million in 2017-18 from $0.54 million in the previous fiscal. Biodiesel and mixtures shipments rose to $5.36 million in the last financial year from $2.73 million in 2016-17. Last year, the directorate had also imposed restriction on import of biofuels including ethyl alcohol and other denatured spirits, bio-diesel, petroleum oils and oils obtained from bituminous minerals other than crude.
UK’s Centrica, Tokyo Gas sign deal for LNG from Mozambique project
Centrica and Tokyo Gas have signed an agreement to jointly buy 2.6 million mt/year of LNG from Mozambique LNG, UK-based Centrica said on Tuesday. The move follows a non-binding deal signed in June 2018, and marks an important step towards the final investment decision by the Mozambique Area 1 joint venture partners, expected for the first half of 2019. The LNG will be delivered ex-ship (DES) to either Europe or Asia, from the start-up of production until early 2040. With the deal, the companies want to take advantage of Mozambique’s central location between Europe and Asia, whose gas markets have different supply and demand fundamentals. The agreement also represents the first long-term LNG procurement contract in Africa for both Tokyo Gas and Centrica, which is in line with their plan to diversify their respective supply portfolios. The deal will improve liquidity and further develop the global LNG market, Centrica said. Mozambique LNG is a planned two-train 12.9 million mt/year project. Partners in the project include Anadarko (26.5%), Mitsui (20%), and with lower stakes, ONGC Videsh, Empresa Nacional de Hidrocarbonetos (ENH), Bharat PetroResources , PTT Exploration & Production and Oil India. Last week, Anadarko Petroleum agreed to sell 1.5 million mt/year from Mozambique LNG to China’s CNOOC for a period of 13 years.
Essar Oil UK acquires BP strategic assets to drive growth
* ESSAR OIL UK GROUP ACQUIRES BP STRATEGIC ASSETS TO DRIVE FURTHER GROWTH * TO BUY STAKE IN UKOP PIPELINE, A SHARE OF CONTRACTUAL JV AND A 100 PERCENT INTEREST IN NORTHAMPTON TERMINAL * ESSAR’S TOTAL INVESTMENT IN THE UK NOW STANDS AT $1 BILLION * REMAINS COMMITTED TO FURTHER U.K. INVESTMENT * CONFIRMED PLANS TO GROW ITS NETWORK TO 400 RETAIL SITES OVER THE NEXT FIVE YEARS
Adani, IOC, GAIL among 225 bidders for city gas licences in 50 cities
As many as 225 bids by companies such as Adani Gas, Indian Oil Corp (IOC), Torrent and GAIL Gas were received on Tuesday at the close of bidding for city gas licences for 50 cities, official sources said. Without disclosing the names of bidders, the Petroleum and Natural Gas Regulatory Board (PNGRB) said “about Rs 50,000 crore” of investment would be plowed in the cities offered for bidding for a licence to retail CNG to automobiles and piped cooking gas to households kitchens. The cities on offer included Gwalior in Madhya Pradesh, Mysore in Karnataka, Ajmer in Rajasthan and Howrah in West Bengal. “About 225 bids were received in respect of all the 50 geographical areas (GAs) offered in the 10th City Gas Distribution (CGD) bidding round. The technical bids would be opened between February 7 and 9,” PNGRB said in a statement here. PNGRB had offered 50 geographical areas (GA), carved out by clubbing adjoining districts in 14 states, in the 10th round of bidding for city gas licences. Bidders were asked to quote the number of CNG stations to be set up and the number of domestic cooking gas connections to be given in the first eight years of operation. Also, they have to quote the length of pipeline to be laid in the GA and the tariff proposed for city gas and compressed natural gas (CNG), according to PNGRB. The GAs, PNGRB said, cover 124 districts – 112 complete and 12 part – in 14 states and extends CGD coverage of 18 per cent of India’s geographical area and 24 per cent of its population. The bid round comes within months of the close of the 9th round, which was the biggest ever city gas distribution licensing round where 86 permits for selling CNG and piped cooking in 174 districts in 22 states and union territories were offered. The government is targeting raising share of natural gas in the primary energy basket to 15 per cent from current 6.2 per cent, in the next few years and the bid rounds are aimed at fulfilling that objective. They are also aimed at meeting Prime Minister Narendra Modi’s target of giving piped cooking gas connection to 1 crore households, roughly triple the current size, by 2020. Cities offered in the 10th round include Nellore in Andhra Pradesh, Muzaffarpur in Bihar, Kaithal in Haryana, Mysore and Gulbarga in Karnataka, Allapuza and Kollam in Kerala, Ujjain, Gwalior and Morena in Madhya Pradesh, Jhansi and Basti in Uttar Pradesh, Firozpur and Hoshiarpur in Punjab, Ajmer and Jalor in Rajasthan, Nainital in Uttarakhand and Darjeeling and Howrah in West Bengal. Companies having a net worth of not less than Rs 150 crore could bid for GAs with a population of 50 lakh and more while the same for GAs with a population of 20-50 lakh has been proposed at Rs 100 crore. The net worth eligibility goes down with population, with a Rs 5 crore net worth firm being eligible to bid for GAs that have less than 10 lakh population.
Loss of Venezuelan oil exports won’t leave huge gap in global market
There is ample spare capacity in other oil producers and strategic reserves to compensate for a loss of Venezuela’s crude exports, helping explain the tepid reaction of global oil prices to U.S. sanctions announced a week ago. Venezuela exports around 1 million barrels of oil per day, about 1 percent of global production, of which half heads to the United States. Many U.S. refineries are designed to run heavier, sour grades of crude, a good portion of which comes from Venezuela. Top oil exporter Saudi Arabia could replace this volume from spare capacity of about 1.8 million bpd, and other members of the Organization of the Petroleum Exporting Countries such as the United Arab Emirates and Kuwait are also able to pump more after an OPEC-led supply cut began in January. Venezuela is one of the founding OPEC members and was once a top three producer but production has been in decline for years following the collapse of the country’s economy. Together with Libya and Iran, it is exempt from the latest OPEC-led supply cut. That earlier decline makes the potential loss of Venezuelan exports less significant. Brent crude, the global benchmark, was trading below $63 a barrel on Tuesday compared to $61 on Jan. 29, the day after the United States imposed sanctions on Venezuelan state oil firm PDVSA. “Cutting out Venezuela from the global oil markets would provide a short term positive strength to oil prices, but its significance would be limited,” said Mihir Kapadia, chief executive of Sun Global Investments. “The U.S. would look elsewhere for oil imports, and refiners will adapt to it.” In contrast, a 2002-2003 strike against former President Hugo Chavez’s government cut supplies and boosted prices to then outrageous levels above $30 a barrel, prompting Saudi Arabia to step in to avert a supply shortage. In addition to other producers being able to pump more oil, the United States holds about 650 million barrels of crude in its Strategic Petroleum Reserve, which oil executives expect President Donald Trump would tap if prices spiked. Two-thirds of the total volume in the SPR is sour crude. “The market reaction is quite subdued,” a senior oil industry official said. “There is plenty of spare capacity plus the SPR if needed. Trump will not allow prices to rise sharply.”
In squeezed oil industry, some rethink hunt for new barrels
New partnerships are emerging in the global hunt for oil discoveries, with some explorers essentially offering an outsourcing service for the riskiest part of the energy business. Central to this new strategy are efforts to find an ally earlier in the process of discovering new fields, and on a larger scale, in order to save money as budgets remain tight after the oil price slump of 2014. While giants such as Total and Eni revamp exploration in-house, BP and Royal Dutch Shell have been more open to having partners do the heavy lifting of exploration in certain geographies. Kosmos Energy and BP, for example, joined forces to hoover up exploration licenses in the northern part of the African Atlantic, rather than competing against each other. In October, Kosmos entered a similar partnership with Shell to search for new oil off southern Africa. “Having a built-in partner with a supermajor from the beginning is very different and allows us to share cost and share risks from the inception of a project,” said Kosmos’ exploration chief Tracey Henderson. “That differs from what used to be a traditional model where a company like Kosmos would pick up acreage in frontier and emerging basins and take more risk upfront … Then we would spend a year and a half identifying and maturing that prospectivity and then go through a farmout process (to sell a stake).” In such partnerships, responsibilities are clearly defined. Kosmos is in charge of exploration and BP of developing discoveries into producing fields. BP gets a nimble partner with a proven frontier-basin track record in Kosmos, which employs around 350 people. This compares to BP’s 74,000 employees in hundreds of sites around the globe, all vying for budget allocation and embedded in complex decision-making structures. “We can make decisions at lightning speed because we’re all within two floors in the same building,” Henderson said. “What vendors or what contractors we can use … It can be as simple as taking a piece of paper to another person’s office.” Exploration projects move between two and three years faster in full-cycle partnership, Henderson said. “I wouldn’t be surprised to see other sorts of joint ventures announced as the year progresses,” Andrew Latham, vice president for global exploration at research firm WoodMac, said of partnerships targeting acreage together from the outset. INDUSTRIAL APPROACH Other oil firms are partnering early at a different point in the exploration cycle, but the aim is the same – to cut costs. Private equity firm Seacrest and technology provider iPulse, backed by a sovereign wealth fund and private equity, founded oil exploration venture Seapulse. The three entities combined employ only about 60 people. Seapulse in December teamed up with Maersk Drilling in a contract worth several hundred million dollars to drill 12 wells. Such an all-in services contract, Maersk estimates, can shave at least 10 percent off the cost of drilling. Seapulse says its portfolio targets 11 billion barrels of gross prospective resources, according to an external estimate, stretching across the North Sea, the Mediterranean, the Caribbean, Latin America, southern Africa and Latin America. Over the next two years, its 12 wells will hone in on 4 billion barrels of prospective resources – a volume which, if realised, would rival Exxon’s gargantuan oil find offshore Guyana. Oil majors BP, Chevron, Eni, Equinor, Exxon, Shell and Total, on average, drilled and operated around 15 offshore wells over the last two years, WoodMac data shows. “Imagine it as an industrial approach to exploration,” said Seapulse chief Scott Aitken, adding he put the cumulative chance of success of the campaign at over 90 percent with schedule control to streamline the use of rigs, teams and vessels. “Maersk is the single contractor in the alliance and they manage all the supply chain. So many overlaps are eliminated.” The venture also leaves behind the traditional day-rate model that contributes to gyrations in drilling costs, whereby low rates hurt services firms when prices slump, and high rates hit operators. With Seapulse, Maersk gets more money for drilling faster and shares in the upside of a discovery. Global exploration spending fell from more than $90 billion in 2014, when crude oil sold for over $110 a barrel, to under $30 billion last year when it fell below $55 a barrel, according to WoodMac. Costs per well also slumped as service companies scrambled for contracts. But the number of wells and companies drilling them have shrunk since 2014 and success rates stagnated following a brief spike in 2017, which stemmed largely from a focus on low-risk wells near existing discoveries, Westwood Energy data shows. “Lots of smaller exploration companies have disappeared since $100 a barrel. New players are emerging, often private equity-backed,” Rob Stevens from Westwood said. U.S. companies such as Marathon, Chevron and ConocoPhillips have shifted away from conventional exploration to focus on shale at home. In the North Sea, Faroe Petroleum was bought by DNO, while Dyas and ONE merged in recent months. “Finding new partnerships to make everyone’s budget go further is really a big priority for everyone in the sector. The slump has forced companies to consider change in the way business is done, existentially,” Seapulse’s Aitken said.