Amid local protests against hydrocarbon projects, ONGC mulling drilling 104 wells in Cauvery asset
Oil and Natural Gas Corporation (ONGC), India’s state-owned hydrocarbon explorer and producer, is planning to drill around 104 wells in its Cauvery asset off the east coast at a cost of Rs 1,560 crore, the company said in an application seeking approval from the environment ministry. The Cauvery asset is headquartered in Karaikal, Puducherry. The plan comes amid major local protests against hydrocarbon projects down south, including neighboring Tamil Nadu. “The present proposal is for obtaining EC for 104 locations from 16 oil and gas fields in eleven ML blocks of Cauvery Asset,” the company said, adding the average cost of drilling each development well is around Rs 15 crore and it has made 33 oil and gas discoveries in the Cauvery Basin so far. Opposition political parties in Tamil Nadu had earlier this year staged protests against permission granted by the environment ministry to Vedanta and ONGC to conduct environmental impact assessment for exploration of hydrocarbons in the state. Puducherry Chief Minister V Narayansamy had in May told media he would not grant permission to Vedanta for exploration of oil and gas in the union territory. According to ONGC’s 2017-2018 annual report, Cauvery basin is coming up as an important area for basement play with encouraging results in Mattur West-I and Pundi-8. The company in order to develop discoveries in basement geographies has already started implementing the approved Field Development Plan for Pandanullur field. Also, the company has identified 9 sites in the Cauvery basin for exploration of shale gas/oil. The rock layer below the economic hydrocarbon reservoirs is referred to as basement in upstream, oil and gas sometimes migrate into older rocks forming basement reservoirs. ONGC’s crude oil production from onshore nomination fields in Tamil Nadu during the first three months (April-June) of the current financial year (2019-2020) increased to 79 Thousand Tonne (TMT), as compared to 69 TMT produced in the corresponding quarter a year ago. The company’s natural gas production from onshore nomination field in Tamil Nadu during the quarter declined to 283 Million Cubic Meter, as compared to 297 Million Cubic Meter in the corresponding quarter a year ago.
Asia LNG spot cargoes trade below $4 on abundant global supply
Cargoes of liquefied natural gas are trading in Asia below $4 per million British thermal units for the first time in several years, as new supply floods the global pool and as demand from North Asia remains weak, industry sources said. The last time a cargo traded below $4 was likely about three to four years ago, two of the six industry sources said on Thursday. Indian Oil Corp bought a cargo for delivery in the second half of August from commodity trader Trafigura at $3.69 per million British thermal units (mmBtu) through a tender, the sources said. Separately, China National Offshore Oil Corp (CNOOC) bought a cargo for delivery in early September from Vitol at $3.90 per mmBtu, the sources added. Companies do not typically comment on their trade deals. Spot LNG prices in Asia were at $10 per mmBtu at the same time last year, after reaching a four-year high in June 2018, Eikon data showed. They have been steadily dropping after a mild winter reduced demand last year and by new supply this year. The Japan-Korea-Marker, a benchmark price assessed by S&P Global Platts that is fast gaining traction among traders, fell to a record low of $3.65 per mmBtu on May 26, 2009, a Platts spokesman said. Platts started the assessment in January of that year. “The market’s pretty weak at the moment and the Indian cargo is probably a record low (price),” said one of the sources, a Singapore-based LNG trader. “Prices are weak in Europe and in the United States as well.” European spot LNG prices have been trading at a discount to the benchmark Dutch month-ahead gas price at levels below $3.40 per mmBtu this week. “We are in an oversupplied LNG market, and demand growth from Asia has not been able to keep up with global supply growth,” said Edmund Siau, an LNG analyst with FGE. “The next price support level would come from turning down of U.S. LNG supply, however winter prices would need to fall significantly for this to happen.” IOC also bought a cargo for September delivery at $4.20 per mmBtu from Vitol, while PetroChina bought a cargo for September delivery from Vitol at $4.05 per mmBtu during the S&P Global Platts trading period on Wednesday, the sources added. While the prices could quickly turn around for the winter amid colder temperatures, high gas inventories in Europe could weigh on prices, Siau said. “More supply is set to arrive on the market with new U.S. LNG trains which are starting and ramping up. We see production from Cameron, Freeport, Corpus Christi, and Elba Island all ramping up through year end,” he added.
Government to reach out to foreign players for oil exploration
The government is planning an aggressive reach out to foreign players to seek their participation in future exploration licensing rounds as worries mount over their near-absence in previous auctions and rising concentration of exploration acreage in just a few hands. The government is planning to shift away from usual roadshows in global investor hot spots and, instead, seek out the managements of international oil companies individually to apprise them of the opportunities in India’s hydrocarbon sector. “Roadshows haven’t really worked well for us. They are mostly populated by analysts and not decision-makers,” said an official. “We want to target decision-makers. And so, are planning to directly reach out to the management of global oil companies.” A direct conversation with top executives can be far more productive as it would not only acquaint them with latest policy reforms but would also give them confidence and comfort that they can easily reach officials concerned in case they need any additional information or clarification, the official said. The oil ministry is planning to contact more than a dozen international oil companies, including super majors and national oil companies, that invest outside their own countries. The government would also participate in major industry events which have significant footfalls and presence of top executives. Just one foreign player and very few private players have participated in three rounds of an auction held under the new Hydrocarbon Exploration and Licensing Policy (HELP) in the last two years despite a string of roadshows in Singapore, Abu Dhabi, London, Aberdeen, and Houston. The auctions have also seen a concentration of acreage with Vedanta winning 51 blocks, or about 60%, of the total. Vedanta, Oil India and ONGC together make up 94% of all blocks awarded. “Past attempts at boosting domestic production have been relatively unsuccessful as a key issue – concentration – has remained unresolved,” a research paper published by The Oxford Institute for Energy Studies in November 2016 said, citing how the holding of the majority of acreage by state-run ONGC and Oil India didn’t help boost local output. “The NELP regime arguably failed to improve the diversity of operators in India’s upstream, leading to a ‘holdup problem,’” the paper said. Holdup problem is where areas of acreage that were bid out were locked up in contracts with little progress made in exploring them. NELP or New Exploration Licensing Policy preceded HELP.
IOCL lays 3.1 km-long petroleum pipeline beneath the Godavari
Indian Oil Corporation Limited (IOCL) has successfully laid one of the longest petroleum pipelines across the Godavari near Rajahmundry, marking a one-of-its-kind engineering feat. IOCL’s pipelines division laid the pipeline through Advanced Horizontal Directional Drilling (HDD). Among Asia’s longest The pipeline, which is 16 inches in diameter and 3.1 kilometres long, has been pulled through the Godavari’s riverbed at a scour depth of 20 metres via a trench-less drill path in six months, making it one of the longest HDD river crossings in Asia, IOCL officials said. The small stretch of pipeline laid was part of the 723 km-long Paradip-Hyderabad Pipeline Project (PHPP) in Andhra Pradesh taken up by IOCL about seven months ago. The HDD pipeline crossing was achieved on July 17. “It was the most critical part of the entire project because of the width of the river and the complexity in laying the pipeline beneath the riverbed. Also, it took great effort and care,” IOCL’s Deputy General Manager (Constructions) B.V.S. Prasad told The Hindu. “It is the longest 16-inch petroleum pipeline HDD crossing in Asia and second longest HDD to be laid for a single stretch of 2.2 kilometres in the country,” he said. Though it is not the first petroleum or gas pipeline laid across the Godavari, it is unique and experimental in the way it was carried across by drilling a 3.1-kilometre horizontal bore in two segments —2,200 m and 900 m — to pass the pipeline across. The two segments were later tied up, explained officials. Innovative project “Two pipelines of other corporations are running across the river on a bridge built exclusively for the purpose. There was no space to accommodate another pipeline on the bridge and IOCL had ventured to use the HDD technology which was nothing short of an experiment,” said Project Engineer M. Vamsi Sri Krishna. The project was executed by Dezhou Shengli Pipeline Crossing Engineering India Private Limited which used two high-capacity HDD drilling machines which were placed on an island in the river from where the trench-less bores were drilled. Over 80 persons, from engineers to labourers, worked on the project. The PHPP traverses for 723 kilometers in Andhra Pradesh and 55% of it has been achieved, according to officials. Once finished, IOCL will be able to transport petroleum products like diesel and petrol from its refinery in Paradip to Hyderabad and other locations in between effectively.
India to be world’s top energy consumer by 2040: Pradhan India
India is going to be the top energy consumer of the world in less than two decades said Minister for Petroleum and Natural Gas, Dharmendra Pradhan. Speaking at the launch of the NITI Aayog’s AIM- Atal Community Innovation Centre, Pradhan said, “Today we are the third-largest consumer and in the coming years, before 2040, in less than 20 years, we will be the number one energy consumer of the world.” Pradhan said that the sources of energy should evolve to meet this demand with a focus on de-carbonizing the economy. He said that the Atal Community Innovation Centre should focus on meeting using local resources, such as non-fossilised bio-mass, to meet the growing energy demand of the country. Pradhan also said that PSUs in the oil and gas, and steel sector would be spending their CSR contributions to support the initiatives of the Atal Community Innovation Centre.
Shell’s profits slump to lowest in over two years on weak oil, gas prices
Royal Dutch Shell’s second-quarter profit slumped to a 30-month low due to weaker gas prices and refining margins, falling far short of expectations and denting a steady recovery in recent years. Shell’s shares were down 3.8% as trading opened in London, compared with a 0.6% decline in London’s FTSE 100 index. Shell, the world’s second-largest publicly-traded energy company, joins rivals Total and Norway’s Equinor in reporting weak results for the quarter. A rise in cash generation – a sign of improving operations – was the one bright spot in the Anglo-Dutch company’s results. “We have delivered good cash flow performance, despite earnings volatility, in a quarter that has seen challenging macroeconomic conditions in refining and chemicals as well as lower gas prices,” Chief Executive Officer Ben van Beurden said in a statement. Net income attributable to shareholders in the quarter, based on current cost of supplies (CCS) and excluding identified items, dropped 25% to $3.6 billion from a year ago – the lowest since the end of 2016. That compared with a profit forecast of $4.93 billion, according to a company-provided survey of analysts. “This set of earnings is weaker than most were looking for and were below expectations in all the main divisions,” Morgan Stanley analyst Martijn Rats told Reuters. “Earnings remain hard to forecast and volatile.” WEAK LNG Profit fell short of expectations across the board but were most pronounced in the flagship liquefied natural gas (LNG)division, known as Integrated Gas, due to $479 million in impairment charges in Trinidad and Tobago and Australia, lower sales and weaker prices. Asian LNG spot prices have more than halved since the start of the year, weighed down by soaring new production. Oil and gas production in the quarter rose 4% from a year earlier to 3.58 million barrels of oil equivalent per day, but was down from 3.442 million boed in the first quarter of 2019. Cash flow, a key measure for the Anglo-Dutch company, rose to $11 billion from $9.5 billion a year ago. Free cash flow – cash available to pay for dividends and share buybacks – dropped to $6.9 bilion. Shell has focused on cash generation as a key measure of growth, targeting free cash flow of $25 to $30 billion a year between 2019 and 2021 and as much as $35 billion by 2025. Rival BP on Tuesday reported a stronger-than-expected profit in the quarter, which was largely unchanged from a year earlier, while France’s Total and Norway’s Equinor both reported sharp falls in earnings.