Talks begin on lifting natural gas pricing restriction
The government has begun deliberations on lifting pricing restrictions on all locally-produced natural gas to ensure producers are able to trade their output on the proposed gas exchange, discover the market price, and help build a mature domestic gas market, according to people familiar with the matter. The oil ministry officials have begun discussing if and how the price restrictions can be lifted on the output from the fields given away to producers under the so-called nomination and NELP regime. Production from these fields, operated mainly by ONGC, Reliance Industries and Oil India, makes up two-thirds of India’s total gas output and is priced according to the 2014 formula set by the government. Output from other producing fields such as Panna Mukta Tapti, Ravva, and Vedanta’s Barmer block already has pricing freedom. “Officials are engaged in initial discussions and figuring out if it can be done and what would be its likely consequences,” said the people with direct knowledge of the matter. Once the ministry formalizes a plan, it would begin consultation with other arms of the government. Gas pricing has been a contentious topic for years and the government has a tough task of balancing the interests of producers and consumers. Increased price realization enhances profitability for producers and increases ability to invest while consumers complain of increased cost. In the past few years, the government has overhauled the upstream policies with new licensing rules, offering all explorers the freedom to market and price natural gas. Pricing freedom was also granted to producers operating difficult fields. The current drive to free up prices for gas from all fields emanates from the oil ministry’s desire to have a functional gas trading hub, which it thinks is essential to help develop a mature gas market. Without enough domestic supplies, the trading hub would be a non-starter. Any attempt at lifting price restrictions would meet fierce opposition from the consuming industries as well as retail customers such as those using piped gas in kitchen or in vehicles. The government is debating if it was possible to directly offer subsidy to end-users instead of providing input such as natural gas at an artificially low price to factories, the people quoted above said. The power sector consumes about 31% of the local gas while the fertilizer and city gas sectors consume 24% and 22%, respectively. Gas used in vehicles and in the kitchen is for top priority customers. In a previous proposal, yet to be approved by the Cabinet, the oil ministry had wanted the domestic gas allocation to be limited to just the city gas and fertiliser sector. The government wants India to become a gas-based economy and aims to raise the share of gas in country’s primary energy mix to 15% by 2030. Imported gas, which has sharply fallen due to global glut, is still dearer than locally produced gas.
Total closes acquisition of 26.5% operating stake in Mozambique LNG
Total has closed the $3.9-billion acquisition of a 26.5% operating stake in the Mozambique LNG project, the French major said Monday, as it continues the rapid expansion of its LNG business. Total agreed in May to buy the African assets of US-based Anadarko Petroleum for $8.8 billion once the latter’s takeover by Occidental Petroleum was completed, with the purchase of the Mozambique LNG stake the first part of the deal to conclude. Closing operations are still ongoing in relation to Anadarko’s assets in the other countries — Algeria, Ghana and South Africa, Total said. “Mozambique LNG is one of a kind asset that perfectly fits with our strategy and expands our position in LNG,” Total CEO Patrick Pouyanne said in a statement. The project — expected to come online in 2024 — includes the development of the Golfinho and Atum fields in Mozambique’s Offshore Area 1 and the construction of a two-train liquefaction plant with a capacity of 12.9 million mt a year. Total said Mozambique LNG was “largely derisked” after almost 90% of the production was sold through long-term contracts with key LNG buyers in Asia and in Europe. The partners in Offshore Area 1 are Total (26.5%), Japan’s Mitsui (20%), Empresa Nacional de Hidrocarbonetos (15%), India’s ONGC Videsh (10%), Beas Rovuma Energy Mozambique Limited (10%), India’s BPRL Ventures Mozambique (10%) and Thailand’s PTTEP (8.5%). LNG Expansion Total has been building its LNG portfolio quickly in recent years, through participation in big-ticket LNG projects and through acquisitions, notably the $1.5-billion purchase of Engie’s portfolio of upstream LNG assets in July last year. Pouyanne, speaking in July after Total released its second-quarter results, said the global LNG market was moving quickly, and that the best way to handle the volatile market environment was by having a large portfolio. He said that by 2025 there would be around 50 million mt/year of LNG in its portfolio, expanding on a previous aim ofhaving an LNG portfolio — including its own production and LNG bought from other parties — of 40 million mt/year by 2020. Its own LNG production is increasing rapidly, and is set to reach 20 million mt in 2020. Pouyanne in July defended the purchase price of the stake in Mozambique LNG, which works out at around $150 million per percentage of working interest. This, he said, is cheaper than a range of other acquisitions that took place between 2012 and 2014 for stakes in Offshore Area 1, which contains the gas for the project, which were valued at $200 million-$260 million per percentage of working interest. He also said he would not rule out sharing more infrastructure in Mozambique with a second LNG project being developed in Mozambique by ExxonMobil, Italy’s Eni and China’s CNPC.
BP CEO draws up plans to step down
BP Chief Executive Officer Bob Dudley is drawing up plans to step down next year, ending a tumultuous decade at the helm of the oil and gas company that swung from near collapse in 2010 to rapid growth today, sources close to the company said on Monday. Dudley, BP’s first American CEO, has indicated several times in closed discussions in recent years that he would like to retire at the age of 65, taking him into 2020. His retirement plans were discussed at BP’s board meeting in the United States last week, but no final date has been decided, according to the sources. A BP spokesman declined to comment.
India’s natural gas production declines 4 per cent in August
India’s natural gas production in August declined 4 per cent to 2,688 Million Standard Cubic Meter (MMSCM) due to drop in fields operated by Oil and Natural Gas Corporation (ONGC), Oil India and Joint Ventures (JVs). Cumulatively, the country’s natural gas production in the first five months (April-August) of the current financial year (2019-2020) declined by a marginal 0.98 per cent to 13,437 MMSCM, primarily due to drop in production from fields operated by Joint Ventures (JVs) or under Production Sharing Contracts (PSC). Natural Gas Production in August Oil Company August 2019 (MMSCM) August 2018 (MMSCM) % difference ONGC 2007.24 2060.68 (3) Oil India 236.93 236.97 (0.01) PSC fields 444.06 490.47 (9.46) Total 2688.23 2788.12 (4) Oil and Natural Gas Corporation ONGC, the country’s largest producer of crude oil and natural gas posted a 3 per cent decline in natural gas production to 2,007 MMSCM in August. This was due to fall in output from fields in Andhra Pradesh, Assam, Gujarat, Rajashtan, Tamil Nadu and western offshore. Cumulatively, the company’s gas production in the first five months declined 3.53 percent to 10,158 MMSCM. The reasons included less gas production from Bassein and Satellite asset, less off-take by consumers and pressure decline in fields situated in the Cauvery asset. Oil India Oil India, another state-owned oil and gas explorer, posted a marginal decline in gas production to 237 MMSCM in August due to decline in production from fields in Assam. Cumulatively, the company’s output in the first five months rose 1.34 percent to 1,153 MMSCM. The reason for the shortfall included the presence of carbon dioxide in production stream in Deohal area, bandh and miscreant activities and the shut down of Namrup Plant II project. JVs Gas production from fields operated by Joint Ventures or those under PSCs slumped 9.46 percent to 444 MMSCM due to decline in output from eastern and western offshore fields and decline in Coal Bed Methane (CBM) blocks in Madhya Pradesh and West Bengal. Cumulatively, natural gas production in the first five months of the current financial year from fields under PSC dropped 12 percent to 2,126 MMSCM. The decline is attributed to closure of two wells in Reliance’s D1D3 field and a halt in production from the MA field apart from the delay in anticipated production from ONGC’s DDW D-5 field.
Delhi’s IGL will lead Indian trucking into gas age
Delhi will lead Indian trucking into the gas age. Indraprastha Gas Ltd, the Capital’s sole supplier of CNG, is working on a plan to convert the fleet of heavy-duty trailers hauling containers between the Tughlaqabad inland port and the industrial belt stretching up to Rewari in Haryana. “TCI has a fleet of 40 trailers. We are discussing to convert them to LNG (liquefied natural gas), beginning with nine vehicles. LNG is clean-burning fuel and will help reduce emission from heavy vehicles,” IGL managing director E S Ranganathan told TOI. This will be the first commercial trucking operation in the country – once it starts –and mark Indian transport sector’s entry to the LNG covenant. For a country where the transport sector guzzles 40% of diesel sales, the environmental benefit from LNG, in terms of reduced vehicular pollution, will be huge. China and the US are currently the world leaders in converting their highway freight service. Ranganathan said conversion of each trailer will cost Rs 9 lakh and take about three months since it would entail importing fuel tanks etc. “LNG will be cheaper than diesel. Savings on fuel cost and green entry tax of Rs 6,000 together will pay back the cost of conversion in seven months. We have offered a financial model to fund the conversion,” Ranganathan said. LNG is heavier than CNG and has more heating value and offers a range of 700-800 Kms on a full tank, which is the same as a truck running on diesel. These qualities make LNG suitable for heavy-duty engines. Under an International Maritime Organisation, all ships are to switch to LNG from April 2020. India’s largest gas importer Petronet LNG has been talking about converting trucking on the west coast highway connecting Delhi with Trivandrum, covering a total distance of 4,500 km via Mumbai and Bengaluru, for the last two years but without much success. The company operates a few buses on LNG to ferry staff at its Dahej LNG import terminal in Gujarat. Oil minister Dharmendra Pradhan had in November 2016 launched a test project one LNG bus in Kerala. The government had in in August 2017 approved the standard for LNG truck kits and tank. This had prompted commercial vehicle makers such as Tata Motors, Ashok Leyland, Mahindra & Mahindra and BharatBenz to step on the gas with LNG version of their vehicles. Some of these manufacturers have sought vehicle ‘type approval’. But commercial sales of such vehicles still looks far. A 2015 Morgan Stanley report said globally natural gas vehicles were displacing 1.5 million barrels a day of oil. That number could double — or even grow by another 5.6 million barrels a day, equivalent to China’s oil imports in 2015 — by 2021.