CCEA extends duration of new urea policy for natural gas-based units
The government Monday decided to extend the duration of the New Urea Policy from April 1 this year till further orders to ensure smooth supply of nutrients to farmers. “Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi has approved the proposal of the Department of fertilisers to extend the duration of New Urea Policy-2015 from April 1, 2019 till further orders, except for the provisions which stand already amended vide notification dated March 28, 2018,” an official statement said. The energy norms of urea plants were revised in March last year. The extension of the policy would facilitate in continuation of operations of urea plants and ensure regular supply of urea to the farmers. In 2015, the Union Cabinet approved a comprehensive New Urea Policy-2015 for the next four financial years. The policy is aimed at maximising indigenous urea production and promoting energy efficiency in urea units to reduce the subsidy burden on the government. India imported around 59.75 lakh tonnes of urea in 2017-18 fiscal year to meet the domestic demand. The country produces around 250 lakh tonnes of urea annually.
Qatar petroleum invites 3 groups to bid for North Field LNG train construction
Qatar Petroleum has invited three groups to bid for engineering procurement and construction packages on liquefied natural gas (LNG) mega-trains as it expands production at its North Field reservoir, the company said in a statement on Monday. The first group invited is a joint venture between Chiyoda Corporation and Technip France S.A., the second comprises JGC Corporation and Hyundai Engineering and Construction Co. Ltd and the third Saipem S.p.A, McDermott Middle East Inc. and CTCI Corporation19.
BRIEF: GAIL India issues tender to sell and buy LNG -sources
GAIL India has offered a cargo of liquefied natural gas (LNG) for loading from the Cove Point plant in the United States in May, two industry sources said on Monday. It is also seeking an LNG cargo for India’s Hazira or Dahej terminal over May to June delivery, the sources said. The tender for the swap deal closes on April 16, they said.
Egypt, Israel inch closer to resolving gas arbitration -minister
Israel’s energy minister said on Sunday that an arbitration case with Egypt over a defunct natural gas deal could be solved in the coming months, but that the issue was not holding back cooperation in the sector. In 2015, the International Chamber of Commerce ordered Egypt to pay state-owned Israel Electric Corp about $1.8 billion in compensation after a deal to export gas to Israel via pipeline collapsed in 2012 due to attacks by insurgents in Egypt’s Sinai peninsula. Egypt appealed the decision and a final agreemnt has yet to be reached, though earlier this month Israel Electric said they were close to reaching an agreement in which Egypt would pay it $500 million over eight and a half years. “I think there is already a final understanding, but it needs approval of the Israeli electric authority and maybe also of someone on the Egyptian side,” Energy Minister Yuval Steinitz said in an interview with Reuters. “Probably it’s an issue of a few months.” In the meantime, Steinitz said, the dispute was not stopping Israel from expanding energy ties with Egypt, one of two Arab countries to have made peace with Israel. Egyptian officials have said the arbitration could hold up commercial agreements. Israel sees Egypt as a key market to export its newfound gas and a landmark $15 billion export deal is due to commence this year. One Israeli company, Delek Drilling, is considering expanding its presence in Egypt by buying into liquefied natural gas terminals that would then export gas to Europe. “There is no linkage, whatsoever, between this arbitration and Israeli and Egyptian energy cooperation and relations. We have no government control on such kind of commercial arbitration,” Steinitz said.
All aboard! Treasure on the high seas for natural gas dealers
In the booming market for supercooled natural gas, the most precious commodity is the ship. A global quest for cleaner energy has fired up demand for liquefied natural gas (LNG), which produces less carbon dioxide than coal. But an abundance of supply has helped keep prices subdued, meaning the most profitable trade is in renting out vessels to transport it. Reflecting the white-hot demand for ships, over a dozen different companies, including energy majors BP and ExxonMobil, trading house Trafigura and gas utility Centrica are already looking to charter boats for the winter, according to four shipping industry sources, months earlier than usual. ExxonMobil, Centrica and Trafigura declined to comment. BP did not respond to requests for comment. Energy firms are trying to avoid getting stuck without ships on charter for the winter, when cold weather typically drives up trade in LNG and, consequently, transport costs. They also want to profit off less nimble rivals. Last winter, spot charter rates – the cost of renting a ship to transport LNG in real-time – soared to almost $200,000 per day in November compared to around $40,000 in May, squeezing those companies which had left it too late to secure vessels cheaply. Currently, spot rates are around $40,000 per day while rates for charters covering next winter are between $70,000-$80,000 a day, two shipping industry sources said. Energy groups including Shell, BP, China National Offshore Oil Corp (CNOOC), Cheniere and Gazprom, utilities Naturgy and Centrica and trading firms such as Gunvor and Trafigura are renting vessels for months or years and sub-letting some of them to competitors, according to half a dozen sources. None of the firms would comment. The market for LNG freight trade is relatively new and many companies are reluctant to talk about trading strategies, which are still being developed. “We see LNG shipping as a commodity on its own,” said Niels Fenzl, Vice President Transportation and Terminals at Uniper, an energy firm which along with Shell, pioneered freight trade within the LNG market. “We were one of the first companies who started to trade LNG vessels around two or three years ago and we see more companies are considering trading LNG freight now.” JUICY MARGINS The market for LNG has exploded in the last few years as countries, in particular China, look to reduce their reliance on coal. Technological developments have also enabled the United States to unlock cheap, abundant shale gas supplies. Starting from scratch, the United States has become the world’s fourth-largest exporter of LNG in three years. Shell predicts that the volume of LNG traded will rise 11 percent this year to 354 million tonnes. Five years ago, it was 239 million, according to the International Group of LNG Importers. The increased trade has, however, resulted in thinner margins between different regions, meaning less opportunity to profit on spreads between LNG prices around the globe. Last winter, the average premium of Asian prices over Europe was around $1 per million British thermal units (mmBtu). In the winter of 2011-2012 it averaged $7.3 per mmBtu, Refinitiv Eikon data shows. Nearly 50 LNG ships were launched last year, bringing the total fleet to around 550, but with LNG supply growing quickly and seasonal peaks, the margins on LNG shipping rates can be eye-popping. Last year, Cheniere made deals in spring and summer for more than 10 vessels to cover its winter positions. Some ships were chartered at around $70,000 a day and rented out in winter at around $90,000 a day, an industry source said. That trade has become a sector legend and sources said others were trying to replicate it this year. “Big portfolio players, like Shell, BP, ExxonMobil and Cheniere, are looking at keeping their ships busy all the time, optimising their positions with their own or third party cargoes to make sure they can squeeze every dollar from their charters,” a senior industry source said. Cheniere denied to comment on its deals. In general, traditional shipowners prefer to stick with long-term charters, which help them finance building new vessels, and let the energy firms and trading houses deal in the riskier short-term sublets. But, given the potential money to be made, there are shipping companies focused almost entirely on servicing the LNG industry’s immediate or near-term requirements. “The spot market is our priority now given the current rate environment as we don’t want to lock our ships in long-term charters prematurely in the recovery cycle,” said Oystein M. Kalleklev, CEO of Flex LNG, a shipping firm founded in 2006. “We also do believe spot is becoming a much bigger part of the LNG shipping market as well as the overall LNG trade.” HEDGING THE RISK Chartering a ship now for next winter is currently the only option for LNG companies looking to hedge their transport costs. But it is also risky. Low LNG prices in Asia could limit trade, leaving a firm stuck with an expensive boat and no one to sub-let it to. The solution would be a shipping futures contract which would allow a company to lock in a price for a future charter without taking a physical vessel – something that was developed for the oil tanker market in the 2000s. There are fledgling moves towards creating LNG shipping futures contracts. Three brokers, Affinity, Braemar and SSY, have been working with the Baltic Exchange since last year to create LNG freight indices. One index went live in March and two more are in trials. The indices – if accepted by the industry – could be the first step towards LNG freight futures. “A lot of our clients see LNG freight hedging as a missing piece of the puzzle. This missing piece is having control over the forward freight,” said Benjamin Gibson, derivatives broker at Affinity. “If you have more shipping capacity then you can react to spot market cargo demand more efficiently.” The difficulty for the index is having enough deals to base a price on, according to Gibson. Also,
Oil import from Iran may be reduced as U.S. mulls waiver
Far from the din of elections, Indian officials are working closely with U.S. officials to ensure that two upcoming deadlines in early May, for the extension of the Iran oil sanctions waiver, as well as the final decision on withdrawing India’s preferential Generalised System of Preferences (GSP) status, end positively for the government, multiple sources in Delhi and Washington confirmed. Lower quotas While the decision on the GSP could be deferred until after elections, the discussions on the Iran oil sanctions waiver have indicated an extension is likely, with India allowed a lower quantity of oil imports from Iran. Last week, following discussions with U.S. Under Secretary for Terrorism and Financial Intelligence Sigal Mandelkar, who visited Delhi in early April to discuss “U.S. nuclear-related sanctions on Iran and the global coalition to combat Iran’s state support for terrorism and ongoing malign behaviour, ” the Ministry of External Affairs (MEA) had said both sides had been “continuously engaged” on the issue of India’s oil imports from Iran since November. India, Turkey and China remain the only countries with significant imports. After initial defiance where it said it only recognised “UN sanctions, not unilateral sanctions”, the Modi government has softened its stand in negotiations for the sanctions waiver from America. According to informed sources, the U.S. is considering an extension of the six-month waiver, but reducing the quantity of oil India can import from the previous allowance of nine million barrels a month. “The waiver lapses on May 4; let’s wait and see what happens. But I think the important thing is that we will continue our engagement to see if we are taking care of our energy security; but the important thing is that the discussions and the engagement should continue and which is continuing between India and U.S.,” said MEA spokesperson Raveesh Kumar. The deadline, for the announcement of the cancellation of U.S. preferential duties or GSP status, set for May 2, may be put off if the U.S. Trade Representative in Washington Mark Lightizer accepts an appeal from India-Causus co-chairs senators Mark Warner and John Cornyn, who wrote to him on April 12, as well as one from Republican Congressman George Holding who wrote to him on March 27. Elections cited In the letter, the senators asked that the U.S.TR should “consider delaying the issuance of a Presidential proclamation to withdraw India’s GSP benefits by at least 30 days, beyond the 60 day calendar, in order to move the negotiations beyond India’s elections…to provide a real opportunity to resolve these market access issues, potentially improving the overall U.S.-India relationship or years to come. ” Despite the appeals, U.S. officials say there has been a growing sense of frustration in their administration on trade issues. Outstanding issues “While we were pleased that growing U.S. exports to India, largely crude oil and LNG, led to a 7.1% reduction in our bilateral goods trade deficit last year, many structural challenges in our trade relationship have yet to be resolved. Trade has frankly been an area of frustration in the relationship, but the door is open if India is prepared to bring a serious proposal to the table,” a Senior State Department official told The Hindu last month. According to the officials, out of the nine outstanding issues on trade, the two sides were able to narrow differences on all but two or three, which were irreconcilable, and led to the U.S. notice on cancelling GSP. These include the issue of certifying dairy products from “vegetarian” cows, and the price caps on medical devices like stents — both of which had originally triggered the GSP review in April 2018. Case in WTO The U.S. also remains concerned about duties and regulations in the Information Technology industry, — an issue for which the European Union has filed a case against India at the World Trade Organisation (WTO) this week. In addition, officials said the U.S. is watching India’s decision on 5G technology closely, particularly the fate of the bid by Chinese company Huawei, given the U.S.’s cases against it.
ONGC arrests output fall from onshore wells, posts higher growth despite vintage fields
Oil and Natural Gas Corp (ONGC) has arrested a declining crude oil production trend in its onshore fields and registered a 1.25 per cent rise in output in the fiscal year ended March 2019, top company officials said. ONGC produced 6.141 million tonnes of crude oil from its onshore fields despite majority of them being more than 50 years old and facing a natural decline. The company has been able to make a production turnaround through a slew of initiatives, they said. India’s largest oil and gas producer has in recent times faced immense pressure from the government, which has blamed it for the continuing decline in the country’s output. ONGC raising output is critical to meeting Prime Minister Narendra Modi’s target of cutting oil imports by 10 per cent by 2022. ONGC has already reversed years of decline in natural gas output, posting a record 6.5 per cent jump in production to 25.9 billion cubic metres in 2018-19. However, oil production from offshore fields continues to be on a decline and will only reverse next year when Krishna Godavari basin field KG-DWN-98/2 comes onstream. Officials said ONGC has monetised five out of the total 13 discoveries during 2018-19 on a fast-track mode which helped contribute to the growth in production from onshore fields. In order to sustain production and achieve higher onshore growth, ONGC drilled 303 wells during the last fiscal, which is the highest since 2014-15. The company has also engaged reputed international oil and gas consulting firm Gaffney Cline & Associates for high level review of two major fields of largest onshore producing asset, Mehsana in Gujarat and a few other onshore fields for enhancement of production. The company has invested about Rs 50 billion in the last fiscal in its onshore operations on a number of projects and has a similar investment plan for the financial year 2019-20, officials said. Talking about the performance, ONGC Chairman and Managing Director Shashi Shanker said: “The growth in onshore production has been achieved beating enormous challenges which cropped up due to ageing of the fields. This has come at a time when fields with similar vintage are facing a sharp decline internationally.” “The onshore fields, which are mostly five-decade old, are faced with increased level of water-cut (the water which comes with oil during production),” he said, adding “while disposing of produced water is a critical issue, the stringent environmental laws and complex land acquisition process make the challenges in onshore quite difficult to surmount.” Shanker said a well-wise focused approach and deploying state-of-the-technology for enhanced oil recovery (EOR) have started paying a rich dividend in not only arresting the decline in production trend but also to grow. ONGC Director (Onshore) S K Moitra said the company continues to take up various initiatives on the EOR front and as many as six EOR projects have been either implemented or are on the verge of implementation.