China’s CNOOC explores opening up LNG terminals under reform pressure
CNOOC, China’s biggest operator of liquefied natural gas (LNG) import terminals, is talking to independent companies about access to its facilities after short trial leases last year, three sources with knowledge of the discussions said. The initiative, begun earlier this year, comes amid Beijing plans to form a national pipeline company by combining assets from state energy companies, in a reform of the sector that’s intended to spur private investment and boost use of cleaner-burning natural gas. Gas terminals and storage tanks, in which China National Offshore Oil Corp, parent of CNOOC Ltd, is among the top investors, could be the next assets to be transferred to the pipeline group that is likely to be launched this year, industry sources following the reform plan said. CNOOC is offering pipeline developers such as ENN Energy and LNG distributors such as Longkou Shengtong Energy the chance to use its LNG terminals on China’s east coast over a 10-year period, with a specified number of slots each year. The business could reap state-run CNOOC tens of millions of dollars a year in relatively risk-free revenue. Broader access to its 20 or so receiving terminals – all built by state majors except for a few by private firms including ENN – would likely boost LNG imports into China. China has been the world’s second-biggest buyer of LNG since 2017, with its intake growing more than 40 percent a year in each of the past two years. As an option to terminal access, CNOOC has also asked companies to offtake some of its import cargoes signed under term agreements with global suppliers, said two of the sources. “The discussions about opening terminals … is compatible with the broad state policy to connect LNG import facilities with main gas pipelines such as the West-to-East project,” said a state oil LNG executive based in the southern city of Shenzhen. The executive declined to be named as he’s not authorized to speak to press. CNOOC did not respond to Reuters’ request for comment. CNOOC sold two five-day terminal slots late last year via open tenders, gaining 63 million yuan ($9.39 million) out of the sales. In one of the deals, private firm Shengtong teamed up with state-owned Zhenhua Oil. The second deal was done by private LNG distributor Zhejiang Panergy. The sales encouraged CNOOC to broaden the openings, and the latest initiative of offering long-term terminal access would also make CNOOC appear supportive of Beijing’s push to open state infrastructure to third parties, the sources said. Private firms, however, remained cautious. “The prices paid for the access need to be regulated. Companies will need to think carefully whether they could pass on that cost to their consumers,” said an executive with a city-gas distributor approached by CNOOC. If CNOOC ties pipeline access to its term cargoes, which tend to be more pricey than the spot market, CNOOC’s initiative could be a hard sell, said a second official with knowledge of CNOOC’s plan.
IGL partners with XGEPL to convert diesel-based power gensets to gas
City gas distributor Indraprastha Gas Ltd (IGL) today announced it has partnered with a local firm XGEPL for converting the diesel power generator sets of its existing PNG consumers in the Delhi-NCR region into gas-based generator sets. “In the pilot phase, the company has converted in-use 3 diesel generators in institutions using Euro IV technology and have been made operational. Apart from contributing to the environment, these gas-based gensets would reduce the operational cost by around 40 per cent as compared to diesel-run gensets,” IGL said in a statement. As part of the company’s green drive, IGL Managing Director E S Ranganathan today inaugurated a gas-based 125 Kilo Volt Ampere genset here.
BP, Exxon to help advance Alaska LNG export project: Alaska Gasline
Alaska Gasline Development Corp (AGDC) said it signed an agreement with BP PLC and Exxon Mobil Corp to help advance the state-owned company’s proposed $43.4 billion Alaska liquefied natural gas (LNG) project: * “Our respective organizations share an interest in the successful commercialization of Alaska’s stranded North Slope natural gas,” AGDC Interim President Joe Dubler said in a statement late Friday. * BP and Exxon Mobil produce massive amounts of oil in Alaska and have discovered huge gas resources that are stranded in the North Slope. * The Alaska LNG project is designed to liquefy 3.5 billion cubic feet per day of gas for sale to customers in the Asia-Pacific region from a facility to be built in Nikiski on the Kenai Peninsula south of Anchorage. It includes an 807-mile (1,300-km) pipeline from the North Slope. * U.S. energy regulators recently delayed the date they expect to decide on the LNG project to June 2020 from February 2020. * Officials at AGDC have said the company is reviewing the timeline to get the project built. * At the same time, AGDC said it is continuing negotiations with several parties interested in the project, including a joint development agreement with Chinese oil and gas company Sinopec, China’s sovereign wealth fund China Investment Corp’s CIC Capital Corp and the state-owned Bank of China.
Govt overhauls oil, gas exploration policy; no profit to be charged on output in less explored areas
In a major overhaul of oil and gas exploration permits, the government will not charge any share of profit on hydrocarbons produced from less explored areas as it looks to attract the elusive private and foreign investment to raise domestic output. Breaking from the two-and-a-half decade-old practice of having a uniform contractual regime for all sedimentary basins in the country, the new policy provides for different rules for areas that already have producing fields and ones where commercial production of oil and gas is yet to be established. Irrespective of the basins, producers will get complete marketing and pricing freedom for oil and gas in future bid rounds, said an official notification detailing rule changes approved by the Union Cabinet on February 28. Oil and gas acreage or blocks in all future bid rounds will be awarded primarily on the basis of exploration work commitment, it said. While companies will have to pay a share of revenue from oil and gas produced in Category-I sedimentary basins such as Krishna Godavari, Mumbai Offshore, Rajasthan or Assam where commercial production has already been established, they will be charged only prevalent royalty rates on oil and natural gas in the less explored Category-II and III basins. “To expedite production, concessional royalty rates will be applicable if production is commenced within four years for onland and shallow water blocks, and five years for deep water and Ultra-deepwater blocks from the effective date of the contract,” it said. India began bidding out oil and gas exploration acreage in 1999 under New Exploration Licensing Policy (NELP) that awarded blocks to companies offering maximum work commitment. But companies were obliged to share with the government profits made after recovery of cost. Two years back, the BJP-government brought in Hydrocarbon Exploration and Licensing Policy (HELP) that provided for blocks being awarded to companies offering maximum revenue at different levels of prices and production. HELP failed to either raise output or attract new players. The notification said the new policy was being formulated “to increase exploration activities, attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins, and enhance domestic production of oil and gas”. While blocks in Category-1 basins would be awarded on basis bided exploration work and revenue share in the ratio of 70:30, those “in Category-II and Category-III Basins will be awarded on the basis of international competitive bids based exclusively on the exploration work programme.” “The contractor will have full marketing and pricing freedom to sell on arm’s length basis. Discovery of prices will be on the basis of transparent and competitive bidding. No exports will be allowed. There will be no allocation by Government,” the notification said. The Contractor will have liberal freedom to transfer/exit the block provided work programme has been adhered to. However, a suitable penalty mechanism will be devised for non-completion of the work programme. The notification said that in case of the existing contracts, marketing and pricing freedom to sell on arm’s length basis through competitive bidding will be permitted to those new gas discoveries whose Field Development Plan (FDP) will be approved for the first time after the date of issuance of the new policy. In case of nomination fields given to national oil companies, marketing and pricing freedom will be provided subject to the condition that FDP for new gas discoveries is approved by DGH. “To incentivise additional gas production from Administered Price Mechanism (APM) fields, reduction in royalty by 10 per cent of the applicable royalty will be granted on the additional production over and above Business As Usual (BAU) scenario. BAU scenario will be approved by DGH on third-party evaluation,” it said. Existing contracts already having marketing and pricing freedom would continue on the existing terms.