Israel-Egypt gas pipeline deal seen imminent
A deal that would transfer control of a natural gas pipeline between Israel and Egypt is expected to be closed in the next few days, the companies said on Sunday. Texas-based Noble Energy, Israel’s Delek Drilling and Egyptian East Gas Co have partnered in a venture called EMED, which last year agreed to buy a 39% stake in the subsea EMG pipeline for $518 million that will carry Israeli gas exports to Egypt. In a regulatory filing in Tel Aviv, Delek said the shares have already been transferred to the buyers while the funds are currently being held in a trust. It noted that no closing conditions remained. “Upon the transfer of the full amount of the consideration to the sellers, which is expected to be performed in the coming days, the EMG transaction will be closed in practice,” Delek said. Partners in Israel’s Leviathan and Tamar offshore gas fields had agreed to sell $15 billion worth of gas to a customer in Egypt — Dolphinus Holdings — but last month the deal was amended to boost supply by 34% to about 85 billion cubic metres, or an estimated $20 billion. Noble and Delek are key partners in both Leviathan — which is set to start production in the coming weeks — and the existing Tamar field off Israel’s Mediterranean coast. “The closing of the EMG transaction marks the dawn of a new era for the Israeli energy market – Israel’s transition to the status of a regional natural gas exporter,” said Delek Drilling CEO Yossi Abu. “The Leviathan project is moving ahead on schedule … and we expect to begin piping the gas from Leviathan already before the end of the year.” The supply deal with Egypt is expected to start in January. To buy into EMG, which owns the 90 km subsea pipeline between Ashkelon in Israel and El-Arish in Egypt, the three partners formed the joint company EMED. East Gas holds 50% of the venture while Delek Drilling and Noble own 25% each. The EMG pipeline has a planned capacity of around 7 bcm per year, with a possibility of increasing that to around 9 bcm per year via the installation of additional systems. Delek Drilling’s shares were up 6.1% in afternoon trading in Tel Aviv.
Oil minister Dharmendra Pradhan lays foundation stone for LPG plant in Hazaribagh
Petroleum and Natural Gas Minister Dharmendra Pradhan on Friday laid the foundation stone for Hindustan Petroleum Corporation Limited LPG gas plant in Hazaribagh, along with fellow Union Minister Arjun Munda and Chief Minister Raghubar Das. “Goodness of natural gas in Jamshedpur. Clean, efficient and safe fuel in the form of #PNG and #CNG will now usher a clean fuel-led development in the steel city,” tweeted Union Minister Dharmendra Pradhan. The LPG bottling plant will have a capacity of 120 TMT (Thousand Metric Ton) and it will be constructed in 26 Acre land in Barhi. The LPG plant at Barhi will meet the demand of LPG in Hazaribagh, Kodarma, Giridih, Chatra, Palamu, Deoghar, Dumka, Godda, Sahibganj, and Pakur. “The plant is being set up at an investment of Rs 161.5 Cr and is scheduled completion date is Sept’21,” read an official release.
Russia’s Sakhalin-2 LNG plant’s expansion put on hold – sources
Plans for the expansion of Russia’s Sakhalin-2 liquefied natural gas (LNG) plant have been put on hold, according to three sources involved in the project, a potential setback to Russia’s ambition to lift its global LNG market share. The main reasons for the hold-up are the lack of gas resources and international sanctions, the sources said, but plans of Russian gas giant Gazprom to boost its pipeline gas supplies to China, have also had an impact. Equity holders in the Sakhalin Energy consortium include Gazprom which controls the project with a majority share, as well as oil major Royal Dutch Shell, Japan’s Mitsui and Mitsubishi Corp. Russia plans to raise its global LNG market share from less than 10% now to 20% by 2035, mainly thanks to cranking up of output by non-state producer Novatek and its partners in the Arctic. Gazprom, Russia’s sole exporter of natural gas via pipelines, has been slower in its LNG plans, focusing on pumping the fuel via pipes instead. Sakhalin-2, off the country’s eastern shores, is Russia’s first LNG producing plant with a capacity of over 10 million tonnes per year. Its two production units, or trains, were launched in 2009 in strategic proximity to Japan, the world’s largest consumer of the sea-borne LNG. The consortium, Sakhalin Energy, has plans to expand and build a third train with a capacity of 5 million tonnes per year. Gazprom had said the expansion could happen in 2021. “There have been no movements on the third line,” a source from within the consortium said. Shareholders have considered several options for the expansion: buying gas from the neighbouring Sakhalin-1 project led by ExxonMobil, developing new resources or a combination. Yet, Sakhalin-1, where the state oil company Rosneft is also a shareholder, is aiming for its own LNG plant. The talks about usage of Sakhalin-1 gas for the Sakhalin-2 LNG plant’s expansion have dragged on for years. Gazprom had initially planned to use resources from the Yuzhno-Kirinskoye field – yet to be commercially drilled and developed – for the Sakhalin-2 expansion. Gazprom and Sakhalin Energy have not responded to requests for comment. Shell in Russia said the company remains committed to the expansion. “The project is very robust from the technical and commercial point of view. However we need to confirm the feed gas supply source,” it said in emailed comments. “Only after such a source is determined, it will be possible to progress the project to FID and further construction.” In 2015, the United States restricted exports, re-exports and transfers of technology and equipment to the Yuzhno-Kirinskoye field, making it harder to develop, in response to Russia’s annexation of Crimea from Ukraine a year earlier. Gazprom has discovered another field, Yuzhno-Lunskoye, but the resources there are not enough for a third train at Sakhalin-2, according to a company source. Next month, Gazprom plans to start landmark gas supplies to China via the Power of Siberia pipeline through which flows are expected to gradually rise to 38 billion cubic metres (bcm) per year during the next five years. Other ways of pipeline gas delivery to China have been under discussion and one of the new possible routes of supplies is the existing Sakhalin – Khabarovsk – Vladivostok pipeline. Russia wants to build a spur from the pipeline to China to the tune of 10 bcm per year but no deal has been clinched with China on that route yet.
Japanese-backed Australian LNG import project faces delay
Plans for a Japanese-backed project to import liquefied natural gas (LNG) to Australia have hit a hurdle as the group struggles to lock in customers, including Australia’s top gas retailer, Origin Energy. Potential buyers are holding off signing contracts after a drop in local gas prices, industry observers and sources said, leaving the A$250 million ($171 million) project well behind its initial schedule of delivering gas in late 2020. The delay risks Australian Industrial Energy’s (AIE) aim of opening a gas terminal in Port Kembla in New South Wales state ahead of a rival project by Australia’s AGL Energy, while both projects are racing to meet a looming gas shortage. AIE, backed by Japan’s JERA, the world’s biggest LNG buyer, trading house Marubeni Corp and Australian mining billionaire Andrew Forrest’s Squadron Energy, is one of five projects aiming to bring gas to southeast Australia. It had hoped its Port Kembla Gas Terminal would start delivering imported gas to industrial users, such as chemicals and brick makers, in late 2020, making it the first off the rank. As of June, the project had lined up the country’s no.3 gas retailer, EnergyAustralia, as its first customer, booked a floating storage and regasification unit and booked contractors to build wharf facilities. However, since then it has failed to lock in deals with 12 industrial users who had expressed interest in 2018. A few of those 12, representing “a very small load”, have since dropped out altogether, Squadron Chief Executive Stuart Johnston told Reuters. Industry observers say manufacturers don’t want to commit to AIE as a global LNG glut has spurred two gas exporters in Queensland – Royal Dutch Shell and APLNG, led by ConocoPhillips – to offer more gas into the local market, driving down prices. “With improved gas availability on the domestic market currently and prices falling, this could delay (AIE’s) process as buyers feel more comfortable continuing to contract for domestic pipeline gas,” said Nicholas Browne, Asia gas and LNG research director at consultants Wood Mackenzie. With manufacturers holding off, AIE is chasing Origin Energy, Australia’s biggest gas retailer, to help get the project off the ground, people familiar with the project said. One person, who declined to be named as talks are confidential, said one sticking point was that Origin was seeking an equity stake in the project. Origin confirmed it has been talking to AIE, among others, about gas supply but played down talk of an equity stake. “We are not actively looking to invest in the project,” an Origin spokeswoman said. Squadron said it would not comment on talks with potential customers. A Marubeni spokesman said AIE was talking to industrial users and energy retailers. JERA, a joint venture of Tokyo Electric Power Co and Chubu Electric Power Co , declined to comment. TIMEFRAME UNCERTAIN AIE’s backers are no longer predicting when it will deliver first gas. “I’m not hanging dates out there at the moment,” Johnston told Reuters. He said the facilities could be delivering gas within 16 months of a final investment decision, and customers were lining up as they expect Port Kembla to be the first to market. The project still needs state approval for greater throughput at the site than it originally applied for. This would meet the needs of retailers like Origin and EnergyAustralia seeking access to more cargoes during the Australian winter, when gas demand from households soars, rather than the steady supply sought year-round by manufacturers. AGL, meanwhile, is grappling with an extended environmental review of its Crib Point import project in Victoria, but still expects to start importing LNG by June 2022. Further delays could see Australia’s southeast short on gas, as the market’s ageing supply source, the Gippsland Basin, is expected to go into a steeper decline from 2023. “This is only three years away, so the longer the projects are delayed, the more security of supply risk the east coast market will be exposed to,” WoodMac’s Browne said.
Two-phased strategic disinvestment for BPCL likely
The government may consider two-phased disinvestment for public sector oil refiner and retailer Bharat Petroleum Corporation Ltd (BPCL), if the initial strategic sale of the entire 53.29 per cent government stake in the company fails to get requisite response. According to official sources, there is fear that no company, including global majors, may commit to invest close to Rs 1 lakh crore required to complete the transanction at one go. Thus, the government may sell half or around 26-27 per cent of its share first and consider complete exit from BPCL at a later stage when the valuation improves after the fund infusion by the strategic investor. The government has tried this model earlier during the strategic disinvestment of metal and mining PSUs — Hindustan Zinc Ltd and BALCO. Then Atal Bihari Vajpayee government had retained minority shareholding in these PSUs after sale and change of management control. “The strategic sale of BSNL would require investors to put in close to Rs 1 lakh crore. While large global oil corporations have the financial muscle to commit such kind of investment, nobody would like to take such a huge risk at a time when oil markets are subdued and there is a gradual shift in energy mix towards renewables and electric mobility,” said a top official of oil PSU on condition of anonymity. The Disinvestment Department (DIPAM) has started the process to appoint advisors for the sale of entire government stake in BPCL. While the mandate of advisors is to come up with fair valuation, identify investors and close the deal, sources said they might also present two scenarios — one where 53.29 per cent stake is sold to a strategic investor, and the other where strategic investor will pick up half of this and take the management control by virtue of having the largest shareholding. In the second scenario, the government will continue with up to 26 per cent holding in BPCL, a portion of which it might dilute when the strategic investor comes up with an open offer. It may also keep a portion for sale at a later stage at higher valuations after the investor pumps in money and lets it grow. The government stake is worth over Rs 60,000 crore at the prevailing price of BPCL shares on the BSE. If the buyer has to further acquire 25 per cent share in an open offer as per the takeover code, the total amount will rise close to Rs 1 lakh crore. This is considered too high even by international standards. On its part, the DIPAM is working out a plan to offload entire government equity to a strategic partner, possibly a large overseas oil entity, like Saudi Aramco, Total, ExxonMobil and Shell. But with the global oil market facing a slump with demand not growing despite supply squeeze, the appetite for a large acquisition becomes difficult. While no Indian company looks like mobilising such huge funds for BPCL buy, industry experts indicated that companies from Russia and the Gulf could be targeted to get the necessary investment. This, sources said, could be done through government to government talks as most oil companies in the region are state-controlled. BPCL could be an attractive buy for firms, ranging from Saudi Aramco to French energy giant Total, which are vying to enter the world’s fastest-growing fuel retail market, where BPCL has significant presence. Alternatively, the government could also keep other oil PSUs, like Indian Oil Corporation (IOC) and OIL India, on a standby to go in for share buybacks in the event strategic sale to a private partner having little success. BPCL operates four refineries at Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity to convert 38.3 million tonnes of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors. The government proposes to raise Rs 1.05 lakh crore from disinvestment in this financial year. It had exceeded asset-sale targets of Rs 1 lakh crore in FY18 and Rs 80,000 crore in FY19.