GSPL pipeline plan gets boost from Jammu and Kashmir move
Gujarat State Petronet Ltd’s (GSPL) ambitious project of developing a natural gas pipeline project from Mehsana all the way up to Jammu and Kashmir is expected to get a major boost with revocation of special status to J&K under Article 370. The project is divided in two phases. Work on first phase connecting Gujarat and Punjab has been on. The second phase, covering Jammu and Kashmir, has been stuck for a long time. “Land acquisition — not permitted under Article 370 — was a major problem in Jammu and Kashmir,” according to a state government official. Now, land acquisition and infrastructure development will be smoother, he added. Also, the Central government’s plans for industrial development in Jammu and Kashmir will create a market for the clean fuel option. The J&K Gas Pipeline Act, 2014 with provisions of Right of User (RoU) needed amendments that got stuck with the state government for a long time, said another government official. “While some amendments were made last year, there was no provision for acquiring land to build gas terminals for storage purposes,” he added. The Centre’s decision to do away with the special status for Jammu and Kashmir paves way for the project as it will now fall under the Union government’s Petroleum and Minerals Pipeline (P&MP) Act, 1962. Officials say challenges of building pipelines in difficult terrains and its economic viability have to be taken into account before starting construction for second phase. The construction work for first phase to build a 1,670km gas pipeline from Mehsana to Bhatinda will begin in a month’s time, said an industry official. Contracts of about Rs 3,000-3,500 crore for laying pipeline infrastructure have already been awarded to companies like Kalpataru Power Transmission Ltd and Hyderabad-based Megha Engineering and Infrastructure Ltd. The first phase will be commissioned in 2020 following which construction for the second phase will begin. The pipeline project is a part of Prime Minister Narendra Modi’s plan for National Gas Grid. A consortium led by GSPL has formed a special purpose vehicle called GSPL India Gasnet Ltd to implement the project. GSPL has a 52% stake in the SPV, with Indian Oil Corp Ltd holding 26%, and Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp. Ltd having 11% each. In 2011, Petroleum and Natural Gas Regulatory Board (PNGRB) had authorized Gujarat State Petronet Limited (GSPL), a subsidiary of the Gujarat government, to lay Bhatinda-Jammu-Srinagar gas pipeline.
Petrobras delays delivery of bids for LPG unit to next week
Brazil’s state-controlled oil company Petroleo Brasileiro SA has delayed until next week the delivery of binding proposals for its liquefied petroleum gas (LPG) distribution unit Liquigas, a source with direct knowledge of the matter told Reuters. Petrobras, as the firm is known, decided to delay the offers after interested parties asked for more time to conduct due diligence on the unit, said the source, who requested anonymity as the matter is private. Liquigas is one of dozens of assets Petrobras has put up for sale in a massive divestment drive aimed at reducing debt and sharpening the company’s focus on deepwater oil exploration and production. Petrobras has already signed deals for about $12.8 billion of divestments this year. This week, Reuters reported that groups led by Brazilian investment firm Itausa Investimentos SA, Abu Dhabi state investor Mubadala and SHV Energy of the Netherlands were expected to submit binding proposals for the unit. Liquigas is expected to fetch between 2.5 billion and 3 billion reais ($757 million), Reuters reported. Newspaper Valor Economico first reported on the delay. The newspaper, citing people familiar with the matter, said the new date for bids was Aug. 16. Petrobras did not immediately respond to a request for comment.
Lower spot LNG may push India’s top gas importer to renegotiate deals
India’s top gas importer Petronet LNG will consider renogiating its long-term supply deals to secure lower liquefied natural gas (LNG) prices if spot prices remain weak for two to three years, its managing director said on Thursday. An inexorable decline in spot market prices for LNG is driving some buyers in Japan and China to request delays in term cargoes, while others are looking to lift lower volumes under their term contracts from LNG sellers. “There is no doubt. We have to be sensitive to the international market. If spot prices continue to be low for 2-3 years then you don’t have much of a choice, and there would be a case to look at renegotiation,” Prabhat Singh told Reuters. Petronet has a deal to buy 7.5 million tonnes of LNG annually from Qatar’s Rasgas and 1.44 million tonnes from Exxon’s Gorgon project in Australia. The Indian company is buying gas under these deals at $8.25-$9.50 per million British thermal units, he said, while spot LNG prices are around $4/mBtu. Petronet previously renegotiated pricing of the Australian deal in 2017 and with Rasgas in 2015. Singh also said there was a gradual shift to pricing long-term gas purchase deals off spot price indices rather than crude oil prices. India wants to raise the share of gas in its energy mix to 15% in next few years from 6.5% currently.
U.S. natural gas demand is at a record and prices keep dropping
U.S. gas futures this week collapsed to a three-year low, while spot prices were on track to post their weakest summer in over 20 years. In other markets, such lackluster pricing would cause investment to retrench and supply to contract. But gas production is at a record high and expected to keep growing. Demand is rising as power generators shut coal plants and burn more gas for electricity and as rapidly expanding liquefied natural gas (LNG) terminals turn more of the fuel into super-cooled liquid for export. Analysts believe the natural gas market is not trading on demand fundamentals because supply growth continues to far outpace rising consumption. Energy firms are pulling record amounts of oil from shale formations and with that oil comes associated gas that needs either to be shipped or burned off. On the New York Mercantile Exchange, gas futures this week dropped to $2.03 per million British thermal units (mmBtu), the lowest since May 2016. For the summer, spot gas prices at the Henry Hub benchmark in Louisiana were on track to fall to their lowest since 1998. Gas speculators last week boosted their net short positions to the highest on record, according to the U.S. Commodity Futures Trading Commission. “All the bulls are gone,” said Kyle Cooper, consultant at ION Energy in Houston. The market is expecting a big boost in gas output this fall after Kinder Morgan Inc’s Gulf Coast Express pipeline comes online in September and releases some of the gas currently stranded and being burned in the Permian. So much associated gas is coming out of the ground that gas prices in the Permian basin in Texas and New Mexico, the biggest U.S. shale oil formation, have turned negative on multiple occasions this year. Meg Gentle, CEO of U.S. LNG company Tellurian Inc, said current pipeline expansion plans will not meet record gas production in the Permian, leading to severely depressed prices at the Waha Hub in West Texas, which touched a record low of negative $9/mmBtu in April. “Negative $9. I’d be happy taking it all for $1,” Gentle said earlier this year at a conference. Tellurian is developing the Driftwood LNG export plant in Louisiana and pipelines to transport gas from fields like the Permian to the Gulf Coast. GRAPHIC: Waha prices turn negative: https://tmsnrt.rs/2GTjcvu The rising production has offset a nominally bullish factor like persistently low inventories. While recent declines in oil and gas prices have prompted energy firms to cut spending on new drilling, a drop in production growth is still considered far away. The U.S. Energy Information Administration projects gas production will rise 10% to 91 billion cubic feet per day in 2019 after soaring 12% to a record 83.4 bcfd in 2018, its biggest annual percentage increase since 1951. One billion cubic feet is enough gas to fuel about five million U.S. homes for a day. GRAPHIC: Falling gas prices: https://tmsnrt.rs/2YR4o6K LNG ISN’T ENOUGH U.S. LNG exports, particularly to Asia, are powering increased demand. They are expected to rise from a record 3.0 bcfd in 2018 to 6.9 bcfd in 2020, according to EIA projections, making LNG the nation’s fastest-growing source of demand. Still, LNG exports account for only about 5% of total U.S. gas use. “LNG is still not a significant enough portion of the consumption pie to independently push prices higher,” said Jim Ritterbusch of Ritterbusch and Associates of Galena, Illinois. Meanwhile, U.S. power generators’ gas use may be peaking, rising to an expected record 30.6 bcfd in 2019 but then falling to 29.6 bcfd in 2020 as renewables produce more electricity, EIA data shows. Daniel Myers, a market analyst at Gelber & Associates in Houston, said “persistent low prices are beginning to crimp producers’ growth expectations” in gas-heavy shale formations such as the Marcellus in Pennsylvania or the Haynesville in Texas, Louisiana, and Arkansas. But the sheer volume of gas produced in oil-heavy plays like the Permian means that supply could remain robust. “Production in the Permian is nearly entirely oil-driven and independent from gas prices,” said Myers.
Adani plans to invest Rs 10,000 crore in city gas distribution networks
Adani Gas, the city gas distribution (CGD) arm of Adani Group, looks to invest close to Rs 10,000 crore in the 15 geographical areas (GA) it won in the ninth and 10th rounds of CGD bidding. The company also looks to advance work on the Gujarat and Rajasthan GAs. “In the ninth and 10th rounds, we won 15 GAs. One of these — close to Faridabad — has already gone into operation. Another should get operational soon,” said Suresh Manglani, chief executive officer, Adani Gas. The company added it has so far spent Rs 400 crore on these GAs and placed vendor orders. “Full investment in the GAs over eight years will be Rs 10,000 crore,” said Manglani, in a post-earnings media call on Wednesday evening. For the April-June 2019 quarter, Adani Gas reported a profit after tax of Rs 79 crore, 43 percent higher from the Rs 55 crore in the same quarter a year ago. As part of the strategy, the company also looks to complete 50 kilometres (km) of pipeline network in the first year of the bid awards. “We will look to advance the pipeline laying in most of the GAs by four to five years, so we can monetise the GA earlier,” Manglani added. Both the ninth and 10th rounds of city gas bids are expected to see around Rs 1.2 trillion investments in India by March 2029. In addition, Adani will also look to focus on certain western regions. “Our main focus is early monetisation of the Gujarat GAs and we push for the Rajasthan GA, specifically Udaipur,” said Manglani. In August 2018, the Petroleum and Natural Gas Regulatory Board issued a letter of intent to 18 successful bidders for 48 GAs. Adani Gas won 11 areas through joint ventures (JVs) and six single bids in the ninth round. In the 10th round, Adani Gas won two GAs and Indian Oil Corporation (IOC)-Adani Gas JV won an additional GA. Adani, along with its JV partner IOC, is authorized to distribute gas in 38 GAs and is currently operating a CGD network in 13 locations together with IOC. The company is confident that gas-pricing changes will not be a concern for its operations. “There is a well-laid-out government policy for administrative price mechanism gas and that has been formulated very well,” said Manglani. He added, “For compressed natural gas (CNG), we source gas from very competitive sources, through a mix of one-year contracts and spots. We look to continue with the same strategy for gas sourcing.” With the completion of the 10th CGD bidding round, CGD would be available in 228 GAs comprising 402 districts spread over all the states and Union territories, covering approximately 70 percent of India’s population and 53 percent of its geographical area. According to the commitment made by various companies during the 10th round, 20,292,760 domestic piped natural gas connections and 3,578 CNG stations for the transport sector would be installed largely during a period of eight years up to March 2029, in addition to the 58,177 inch-km of steel pipeline.