BP eyes Brazil gas buildout, may swap LNG imports for domestic output
BP Plc wants to be part of an effort to build up natural gas infrastructure in Brazil, an executive said on Tuesday, and believes a power plant it is building in Rio de Janeiro could eventually be supplied by gas from offshore oilfields here. Speaking at Rio’s Offshore Technology Conference on Tuesday, BP Regional President for Latin America Felipe Arbelaez said he believed a plant being built by a consortium of BP, Germany’s Siemens AG and Brazil’s Prumo Logistica SA could eventually be fired by offshore gas rather than imported liquefied natural gas (LNG), as plans now forecast. “Associated gas can definitely compete with LNG in Brazil, and there is tons of associated gas,” Arbelaez said, using a term for the gas pumped from fields that primarily produce oil. “BP, over time, if I had to guess, will be satisfied with associated gas,” he said. Offshore gas is considered both a problem and opportunity in Brazil. The country is quickly ramping up oil production in offshore fields, many of which have significant gas volumes. Traditionally, gas produced in such fields is burned off or “re-injected” in a process that increases crude production. But some fields coming online have too much gas for those processes to remain viable. At the same time, there are few pipelines to bring the gas ashore and domestic consumption is weak. The government is encouraging more gas infrastructure, and firms with gas-heavy fields, such as Norway’s Equinor ASA , are looking at building pipelines and onshore terminals. “We’re convinced that there is a need for additional infrastructure to be built,” Arbelaez said. “We believe there is probably a need for between two to three … gas processing corridors in the next 10 to 15 years.” During the same panel, executives from Equinor and Portugal’s Galp Energia SGPS SA also said they expected to be selling offshore Brazilian gas to consumers within the next two years. “I have the certainty that Galp will be selling gas in the next two years to clients,” said Miguel Pereira, chief executive of Petrogal, a Galp unit. “We have to surpass some barriers but we are dealing with it.”
China gas demand to surge through 2035, coal to still offer stiff rivalry
China’s natural gas demand is expected to rise by more than 300 billion cubic metres (bcm) between 2018 and 2035, or 30% of global volume growth, stoked by the country’s push to shift to the cleaner fuel from coal, a senior executive of PetroChina said on Wednesday. However, despite the huge growth potential, natural gas still faces stiff competition from coal as a fuel for power generation and heating as China advances low-emission, or so-called “clean-coal” technology, said Ling Xiao, a vice president of China’s top oil and gas producer, addressing an industry gathering in Singapore. Meeting part of that demand surge, gas from Russia’s Siberia fields is due to start arriving at the Chinese border from December. That supply, however, is more costly than the domestic wholesale benchmark, meaning PetroChina as the contractual buyer of the gas will incur losses in marketing the fuel, said Ling. “It’s slightly cheaper than central Asian gas but PetroChina will still be making a loss as it (the price) exceeds that of domestic city-gate benchmark rates,” Ling told Reuters, speaking separately on the sidelines of the Singapore International Energy Week. Russian gas giant Gazprom will supply China about 5 bcm of gas for 2020, via the landmark ‘Power of Siberia’ project, but the full ramp-up to the designed annual capacity of 38 bcm will depend on the cost of gas and how affordable that is to Chinese consumers. China consumed 280 bcm of gas last year, making up 7.4% of the world’s total demand, Ling said. PetroChina is due to publish its third-quarter earnings later on Wednesday. For power generation, gas faces stiff rivalry from coal in which China has advanced ultra-low emission coal technology, and from renewables such as solar, while cost of solar power generation has dropped drastically over the past decade or so, Ling said. For imported gas to be economical versus these competing fuels, the prices end-users, such as power plants, pay at their factory gate shall be capped at 1 yuan to 1.9 yuan per cubic metre, said Ling. That roughly equals to $3.8 to $7.2 per million British thermal unit (mmbtu). Since July 2018, Chinese national energy producers have been expanding exploration and development both onshore and offshore, leading to several major discoveries such as conventional gas deposits in the Tarim basin in the northwest and shale gas prospects in Sichuan basin in the southwest. China could amass a total natural gas supply capacity from domestic fields of nearly 700 billion cubic metres by 2035, Ling said, without elaborating on how much the actual output could possibly reach in that period.
Petronet net nearly doubles on lower corporate tax rate
Petronet LNG Ltd, the country’s biggest importer of liquefied natural gas, on Tuesday reported a near doubling of net profit in September quarter as it derived benefit of lower corporate tax rate. Net profit in July-September at Rs 1,089 crore was 90 per cent higher than Rs 572.89 crore net profit in the same period, company CEO and Managing Director Prabhat Singh told reporters here. “Pursuant to the introduction of the lower tax rates for corporates by the government for FY 2019-20, the company has taken the benefit of lower corporate tax rate of 22 per cent (as against 30 per cent) in the current quarter,” he said. “Due to the same, there is a reversal of deferred tax liability of Rs 380 crore.” Revenue from operations, however, slipped to Rs 9361.18 crore from Rs 10,745.34 crore in the second quarter of the previous fiscal year due to fall in volumes, prices and foreign exchange variations. Lower LNG imports impacted revenues by Rs 900 crore while an over USD 1 drop in gas prices led to Rs 560 crore cut in revenues. Also foreign exchange variation cost was Rs 150 crore, he said. Petronet’s Dahej import facility in Gujarat operated at around 108 per cent of its expanded name place capacity of 17.50 million tonnes and processed 240 trillion British thermal units of LNG as against 211 TBtus processed a year back. Its Kochi terminal operated at 20 per cent of the 5 million tonnes name place capacity. “The company elected to exercise the option of a lower tax rate of 25.17 per cent (announced last month by the government),” the notes to the company’s financial results said. “Accordingly, the deferred tax liabilities (net) (DTL) as at June 30, 2019 and estimate of tax expense for the quarter ended June 30, 2019 have been remeasured and resultant impact of Rs 376 crore on DTL and Rs 70 crore respectively pertaining to previous quarter have been recognised in the current quarter.” Petronet said its board of directors approved a special interim dividend of Rs 5.50 per share for the 2019-20 fiscal year.
India to spend $100 billion on energy infra, says PM inviting Saudi investment
India will invest a massive $100 billion in oil and gas infrastructure to meet energy needs of an economy that is being targeted to nearly double in five years, Prime Minister Narendra Modi said on Tuesday as he sought investment from oil kingpin Saudi Arabia and other nations to boost supplies. Speaking at Saudi Arabia’s annual investment forum, also known as ‘Davos in the desert’, Modi promised stable, predictable and transparent policy regime to catalyse foreign investments. “India is investing heavily in oil ad gas infrastructure,” he said adding as much as $100 billion will be spent by 2024 in creating additional oil refining capacity, laying new pipelines and building gas import terminals. The world’s third-largest energy consumer is 83 per cent dependent on imports to meet its oil needs and about half of its gas needs are shipped from abroad. Its per capita energy consumption is a fraction of the global average and it is now investing heavily in physical infrastructure as well as city distribution to boost availability in a growing economy. Saudi Arabia is India’s second-largest supplier of crude oil and New Delhi is keen to expand this partnership beyond the buyer-seller relationship into a strategic one with cross investments. Modi highlighted the recent opening of the fuel retailing sector for non-oil companies to lure investment in the world’s fastest-growing consumption centre. “India needs investments in the energy sector to meet the demand of a fast-expanding economy. And I request energy companies present here to take advantage of this opportunity,” he said. Modi said Saudi national oil company Aramco has decided to invest in the 60 million tonnes a year West Coast refinery project in Maharashtra – which will be Asia’s biggest refinery. Aramco, whose planned initial public offering is touted to be as big as the size of the Indian economy, too is keen to venture into fuel retailing and the petrochemical sector so as to lock-in consumer for its oil in a world that is fast-moving towards renewable energy sources and electric vehicles. “I want to ensure you that India’s rate of growth is going to rise further. We are taking steps for the growth of our economy,” he said. “We are improving on our ease of doing business ranking. Due to political stability, predictable policy, and big diverse market, your investment in India will be most profitable.” Stating that infrastructure is a technology multiplier, he said it not only provides investment opportunity but it also important for the growth of the business. “The requirement of physical infrastructure is in developing countries. Asia requires $700 billion per year for infrastructure development. We have set an investment target of spending $1.5 trillion on infrastructure development in the next few years,” he said. This target includes oil and gas plus other infrastructure such as roads, airports, and ports. The prime minister said India is targeting to nearly double the size of its economy to $5 trillion in the next five years. “Roadmap for reaching the $5 trillion economy target is ready. The target is not only about quantitative growth but also about improving the quality of life of every Indian.” He said five big trends impacting global businesses are technology and innovation, infrastructure, human resources, compassion for the environment and business-friendly governance. Transformative technologies such as Artifical Intelligence, Genetics, and nano-technology have become part of daily life, he said adding India has become the world’s third-largest startup ecosystem. “Indian start-ups are acing everything, from food delivery to transport, to hospitality, to medical treatment, to tourism,” he said urging venture funds to invest in start-ups in the country. Stating that infrastructure is an opportunity multiplier, he said infrastructure is needed for the business to grow. India, he said, is adopted an integrated approach for infrastructure development. “India is integrating infrastructure through one nation one power grid, one nation one gas grid and one water grid, one nation one mobility card, one nation one optical fibre network.” Infrastructure growth in India will be in double-digit and there is no possibility of capacity saturation. For international investment depends on quality manpower and so skilling of human resources is essential, he said, adding 400 million people will be skilled in different streams in 3-4 years. “International trade agreements should not be restricted to goods alone. Manpower and talent mobility should be an integral part of it,” he said.
Indian LNG customers choosing spot buys over long-term deals – Petronet LNG exec
* Indian customers are choosing spot cargoes over long term LNG contracts as spot purchases are cheaper, Prabhat Singh, chief executive of India’s Petronet LNG Ltd said on Tuesday. * Petronet is considering renegotiating long term LNG contracts with Qatar’s RasGas, Singh said * Delivered Price Of Spot LNG is $6.30-$6.40/Mmbtu vs $7.50-$8.50/Mmbtu for supplies under long term deals, he said * Russia’s Novatek wants to set up a small scale LNG plant in India for retail sales, he said * Singh said Petronet was looking at buying a 26% stake in Bharat Petroleum Corp Ltd’s planned east coast terminal * Petronet will appoint an adviser in November for due diligence of a deal with Tellurian Inc, he said. * Petronet benefitted from lower corporate tax during the September quarter, Singh said
RIL draws government ire by monopolising sale of its own CBM
The government is weighing options of terminating the production-sharing contract (PSC) or invoking arbitration to penalise Reliance IndustriesNSE 0.32 % (RIL) for selling to itself all the coal bed methane (CBM) it produces, allegedly in violation of policy, sources said. The government has informed RIL of its objection to the gas sale, but the company asserted it had acted transparently and correctly, sources familiar with the development said. A RIL spokesman told ET that the gas sale had also maximised government benefits because it won the auction by bidding a higher price, which, in turn, increases the state share of profit from the output, apart from increasing tax revenue. “RIL conducted open and transparent bidding process through a reputed independent third party, in compliance with provisions of the CBM contract and policy. RIL emerged as the highest bidder. Supply of CBM gas to RIL, pursuant to the bidding process, maximises benefit to the government. Gas being supplied from RIL’s block is in compliance with provisions of the CBM contract and policy,” the spokesperson told ET. The oil ministry did not respond to ET’s query, but sources familiar with the development said it was considering the matter. “There are two options — terminate the PSC or invoke arbitration. The government is yet to make up its mind on which course to take,” said the source. Officials said that according to policy, a producer can sell CBM to an affiliate if it fails to find a buyer in an open and transparent auction. The government felt RIL didn’t act in line with policy by not waiting to find a buyer, and participating in the auction along with other bidders. They said the transaction could not be regarded as an arm’s-length sale because Reliance Industries itself appointed Crisil Risk and Infrastructure Solutions that managed the auction,and that allegations of conflict of interest cannot be ruled out. In response to RIL’s argument, that its participation in the auction helped discover a higher price, officials said sanctity of the process was more important because if bidders lost faith, future auctions may see limited participation and lower price discovery. The oil ministry took a view late last year that RIL was wrong in buying all the CBM it would produce in Madhya Pradesh until March 2021. This followed a yearlong process that involved consultations with the Directorate General of Hydrocarbons (DGH) and the law ministry as well as a representation from Reliance Industries. RIL had bid highest in an auction held in September 2017, which was preceded by two similar but shorter CBM auctions that year, in both of which RIL emerged winner. The DGH, quasi-regulator for the upstream sector, raised concerns about the sale, which prompted the oil ministry to thoroughly examine the matter. Government action can trigger a long legal battle –one reason why it hasn’t acted in a hurry. The government and Reliance Industries, India’s largest company by market value, are already waging legal battles over several oil sector-related disputes. Officials said Reliance’s action in the sale of CBM gas may set a precedent. Recently, BP group chief executive Bob Dudley said its joint venture with RIL can sell natural gas from its KG D6 deep sea project to its affiliates without violating the terms of its production sharing contract with the government. The deep-sea gas auction is slated for early November. Sources close to Reliance question the CBM policy, saying it’s unfair to not permit a company to bid for the gas it produces. By barring RIL, one of the biggest consumers of gas, from bidding for the gas it produces, the policy doesn’t allow fair price discovery, they said. To address this, the oil ministry, while deciding on RIL’s CBM sale case last year, had also mooted the idea of amending policy by permitting affiliates to participate in auction if the bidding process is conducted by the Directorate General, according to people familiar with the matter. There is no progress on that yet.