Chevron’s new design for Indonesian gas project to cut output: Regulator
Indonesia’s upstream oil and gas regulator has lowered its peak gas output estimate for the Indonesia Deepwater Development (IDD) project after operator Chevron Corp cut investment due to a change in the facility’s design, a regulatory official said on Thursday. Peak output is now expected to reach around 700-800 million standard cubic feet per day (mmscfd), compared with an initial estimate of over 1 billion cubic feet per day (bcfd), when the remaining two gas hubs start production, Fatar Yani Abdurrahman, deputy chairman of regulator SKK Migas, told reporters. The lower estimate was due to the design change, including using the shallow-water platform instead of deep water, Abdurrahman said on the sidelines of an industry forum. Last year, the government said Chevron planned to halve its investment for the project to $6 billion from $12.8 billion, but targeted production would remain the same at 1.1 million bcfd and 31,000 barrels of condensate. The project began production from the Bangka field in 2016 and Chevron is in the process of developing the Gendalo and Gehem gas hubs off the coast of East Kalimantan. Production from the two gas hubs combined is expected to reach 700 mmscfd, though Bangka’s output has declined, Abdurrahman said. “Now, Bangka production is already depleted to below 100 mmscfd, to around 60 mmscfd,” he said. Chevron and other stakeholders in the project, Italy’s ENI and China’s Sinopec, are in a discussion for a revised plan of development, which they will hand over to SKK Migas for approval. “Now, we’re just waiting for the decision from Chevron and partners. The later they submit it, the project will be more delayed and it will be more costly,” he said. The regulator has pushed Chevron and its partners to speed up their talks so that the project can meet an onstream target of 2024.
Rosneft CEO says Sakhalin-1 to build its own LNG plant in Russia’s De Kastri port
Shareholders in the Sakhalin-1 oil and gas project in Russia’s far east have decided to build their own liquefied natural gas (LNG) plant in the Pacific port of De Kastri, which could supply the super-cooled gas to Japan, Rosneft’s chief executive said. The four companies – Rosneft, Exxon, Japan’s SODECO and India’s ONGC Videsh – are partners in the Sakhalin-1 group of fields. The partners were considering whether to build their own LNG plant or to sell gas to Gazprom. Gazprom, Russia’s top gas company, leads another project on the Pacific island of Sakhalin, Sakhalin-2, and is planning to expand its production capacity from the current 10 million tonnes of LNG per year. Gazprom was in talks with the Sakhalin-1 shareholders about buying gas from that project for the Sakhalin-2 expansion but the parties have so far failed to agree on the selling price. Sources told Reuters last year that Sakhalin-1 planned to build its own LNG plant at the De Kastri port in Russia’s Khabarovsk region, where Rosneft already has an export terminal for Sakhalin-1 oil. “This year, shareholders made a decision to build our own LNG plant in De Kastri with a capacity of 6.2 million tonnes (per year),” Rosneft Chief Executive Igor Sechin said in a statement on Thursday. “Its products will be much in demand in Japan due to the geographical proximity of the two countries.” Russia has two large-scale LNG plants so far, Sakhalin-2 and Novatek’s Yamal LNG. Novatek, Russia’s top private gas producer, plans to launch another one, Arctic LNG-2, in 2023. Japan has stakes in both Sakhalin-2 and Arctic LNG-2 projects. Sechin, whose Rosneft has long sought to build its own LNG plant, did not provide timing or costs of the project in the statement on Thursday. Sources told Reuters last year that the De Kastri option for the LNG plant would allow the costs to be spread among Sakhalin-1 stakeholders and the broader involvement of participants may mitigate sanctions risk. Sakhalin-1 is led by Exxon with a 30% stake while Rosneft owns 20% with the rest split between SODECO (30%) and ONGC Videsh (20%).
Iran agreed to buy OVL gas but US sanctions stalled talks
Iran had agreed to buy the gas produced from ONGC Videsh Ltd-discovered Farzad-B field in the Persian Gulf, but talks got stalled after the US reimposed sanctions against Tehran. ONGC Videsh Ltd (OVL), the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), had in 2008 made a significant natural gas discovery in the Farsi offshore exploration block in the Persian Gulf, the company said in its latest annual report. The discovery was named Farzad-B. “Since April 2016, both sides negotiated to develop Farzad-B gas field under an integrated contract covering upstream and downstream including monetization/marketing of the processed gas, however, negotiations remained inconclusive,” it said. During 2018-19, the National Iranian Oil Company (NIOC) proposed the development of the gas field and “offtake of raw gas by NIOC at landfall point(s),” it said. “However, due to imposition of US sanctions on Iran with effect from 5th November 2018, technical studies could not be concluded which is a precursor for commercial negotiations,” OVL said. Any company investing in the Iranian oil field will attract US sanctions, crippling its ability to access the international financial system. OVL has projects in 21 countries and cannot risk being cut off from international payment system. The Exploration Service Contract (ESC) for the over 3,500 sq km Farsi block was signed on December 25, 2002. OVL holds 40 percent stake and is the operator, while the remaining stake is held by Indian Oil Corp (40 percent) and Oil India Ltd (20 percent). The exploration phase of the ESC expired on June 24, 2009. “The Master Development Plan (MDP) of Farzad-B gas field was submitted in April 2011 to Iranian Offshore Oil Company (IOOC) – the then designated authority by NIOC for development of Farzad-B gas field. Subsequently, the Development Service Contract (DSC) of Farzad-B Gas Field, though negotiated till November 2012, could not be finalized due to difficult terms in the DSC and international sanctions on Iran,” the company said. Since April 2015, negotiations restarted with Iranian Authorities to develop the Farzad-B gas field under a new, Iran Petroleum Contract (IPC). OVL has so far invested Rs 161.2 crore in the block. Company officials said Iran previously conditioned granting rights to develop the Farzad-B fields on Indian firms buying all of the gas produced at the imported-LNG equivalent rate. This proposition, which involved an investment of USD 11 billion in first developing the field and then setting up a facility to convert it into liquid gas (liquefied natural gas or LNG) for shipping to India, was considered very expensive, they said. Iran thereafter agreed to take delivery of all of the gas produced from Farzad-B offshore field at a landfall point in the Persian Gulf nation. Farzad-B field has an in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 Tcf is believed to be recoverable. India and Iran were initially targeting concluding a deal on Farzad-B field development by November 2016, but later mutually agreed to push the timeline to February 2017. The deadline to wrap up negotiations was later targeted for September 2017. But, with the deal stuck over the pricing of gas, no new deadlines have been proposed.
R Kesavan takes over as HPCL’s Finance Director
R Kesavan on Thursday took over as the Finance Director at Hindustan Petroleum Corporation Ltd (HPCL). He is also the Chief Financial Officer at the government-owned oil and natural gas company, according to a statement. Kesavan was earlier Executive Director of HPCL’s Corporate Finance division for over four years. He is a fellow member of the Institute of Chartered Accountants of India (ICAI). Kesavan brings with him three decades of experience in corporate accounts, audit, treasury management, risk management, budgeting, pricing, corporate strategy and margin management.
BPCL, HPCL buy more gasoline to plug supply gaps
India’s Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) continue to import gasoline to plug a persistent supply gap as their refineries undergo maintenance and upgrade to produce cleaner fuels. BPCL on Wednesday bought 20,000 tonnes of gasoline for Sept. 16-18 arrival at Kandla at premiums of about $4 a barrel to Singapore quotes on a cost-and-freight (C&F) basis, industry sources who track the fuel said on Thursday. This has pushed its total purchases for cargoes scheduled for a seven-month delivery period over March to September to at least 110,000 tonnes. HPCL has a larger appetite for the fuel, buying more than 155,000 tonnes for September and October, with its most recent purchase made on Aug. 29 from Total, the sources said. HPCL also has an outstanding tender to buy another 30,000 tonnes for Oct. 10-12 arrival at Visakhapatnam. HPCL had been actively seeking gasoline since December last year but results of its earlier buy tenders were not clear. The companies did not immediately respond to requests for comment. India remains a gasoline exporter despite the buying spree, although its net gasoline exports between January and July this year have been reduced to a monthly average of 950,000 tonnes compared with 1.11 million tonnes for the same period last year, official data showed. Demand from India alone has been insufficient to drive the Asian gasoline market higher due to expanding refinery capacities in China, where gasoline shipments in July at 1.56 million tonnes were 75% higher than a year ago. The average Asian gasoline profit margin this year as of Sept. 4 was $4.12 a barrel, down nearly 45% of its value when compared to the same period in 2018.
Reliance Industries and BP scout for natural gas buyers
Reliance Industries and BP are seeking buyers for natural gas from their $5-billion deep sea project in the KG D6 block at a time when rates have crashed due to global supply glut. RIL and BP, which are jointly developing three fields named R-Cluster, Satellites, and MJ in KG basin, have launched the process to auction 5 million metric standard cubic meters per day of gas from the R-Cluster field that is slated to start production in April-June 2020. This will be the first output from three fields, which are expected to produce 1 billion cubic feet a day when fully developed in 2022. CRISIL Risk and Infrastructure Solutions Ltd will manage the bidding process and evaluate the bids, which must be submitted electronically on October 10. A bidder will have to quote a price (expressed as a percentage of the dated Brent), supply period, and the volume of gas required. Dated Brent means the average of published Brent prices for three calendar months immediately preceding relevant contract month in which gas supplies are made. Bidders can’t quote below 9% of dated Brent price. So, at Thursday’s Brent oil price of $60.71/ barrel, the floor price would be $5.46/m metric British thermal unit (mmBtu). The government set ceiling for gas from difficult fields, currently at $9.32/ mmBtu, would act as the cap. The global supply glut has sharply cut rates of liquefied natural gas (LNG) to below $4 per mmBtu in the spot market. Indian Oil Corp reportedly bought an LNG cargo last month for $3.69 per mmBtu, equal to the domestic formula price for gas from ordinary fields.