Japan marks 50 years of LNG imports with eye on Asia growth
Japanese gas buyers on Wednesday marked the 50th anniversary since the first cargo of liquefied natural gas (LNG) arrived in Japan, now the world’s biggest importer of the fuel. The arrival of the cargo on Nov. 4, 1969 helped transform Japan’s energy system, which had relied on oil, coal and gas from coal in an era of high growth, before nuclear power was developed. But Japan’s energy situation is undergoing huge changes in the wake of the Fukushima nuclear disaster in 2011, which pushed LNG imports to record highs as reactors were closed and the government liberalised the gas and power markets. LNG demand is forecast to decline steadily as more reactors are switched on and renewables backed by government-mandated high prices are developed. Coal has also seen an increase since Fukushima but social pressure on emissions means its use is being questioned. “Japan has been leading the way to grow the LNG market, but we now have to think from a global viewpoint as Japan’s domestic demand will fall due to an ageing population and declining birthrate,” Michiaki Hirose, chairman of the Japan Gas Association, told reporters on Tuesday. Hirose is also chairman of Tokyo Gas, the country’s biggest city gas supplier. Japan’s gas industry should contribute its knowhow to help develop LNG markets in Southeast Asia where energy demand is expected to grow, Hirose said. The industry should also promote LNG as a backup to compliment power supply fluctuations seen in renewables, he said. Japan’s industry minister said in September that Japan and its private-sector firms would invest $10 billion in LNG projects worldwide, in a strategy to boost the global LNG market and reinforce the security of energy supply. LNG is a natural gas that has been cooled to minus 162 degrees Celsius. At that temperature, natural gas turns liquid, which takes up to 600 times less space than in its gaseous state, making it feasible to deliver anywhere in the world. Nov. 4 marked 50 years since the “Polar Alaska” LNG ship arrived at Negishi LNG Terminal in Yokohama, near Tokyo, jointly operated by Tokyo Electric Power Co, now JERA, and Tokyo Gas, transporting LNG from the Alaska LNG Project owned by Phillips Petroleum, now ConocoPhillips. JERA, Tokyo Gas, Mitsubishi Corp, which acted as a buyer’s agent 50 years ago, and ConocoPhillips held a ceremony for the 50th anniversary on Wednesday in Yokohama. Nov. 4 was a public holiday in Japan.
Total-Adani deal signals robust investment appetite in gas ‘sweet spot’ India
Total’s move to buy a more than one-third stake in Adani Gas is a sign of the growing appetite that global energy firms have in investing in India’s gas sector, with analysts hopeful that New Delhi’s push to encourage the consumption of cleaner fuels would increasingly attract more such investments. “The Total-Adani joint venture creates a put option on Total’s global LNG portfolio in a market with huge potential for demand, a move replicated in other countries as sellers become partners with buyers,” said Chinmayee Atre, LNG analyst at S&P Global Platts Analytics. Total announced in October that it would acquire a 37.4% stake in Adani Gas and also set up a joint venture for marketing natural gas in India and Bangladesh. Adani Gas, one of the four largest distributors of city gas in India, is 74.8% owned by Adani Group. As part of its strategy to develop new gas markets, Total is expanding its partnership with Adani Group, which includes the Dhamra LNG import and regasification terminal in eastern India, and could potentially include Mundra in the west, Total said. GROWING INTEREST OF ENERGY MAJORS Total’s gas ambitions for India come a time when other international oil majors, like Shell and BP, are stepping up efforts to play a bigger role in India, where the share of gas in the energy mix is as low as 6%, compared with a global average of 24%. “Similar deals maybe possible as other domestic oil companies foray into the gas marketing space,” Atre of Platts Analytics said. With international gas production rising sharply and India being one of the most under-penetrated gas markets, many international companies were keen to invest in India’s gas sector to have an early mover advantage, analysts said. “India is a sweet spot as far as gas is concerned,” said Sumit Pokharna, oil and gas analyst at Kotak Securities. “Looking at growing global supplies, India offers a strong value proposition because of cost economics. More international companies might look to invest in the gas value chain in India.” India’s dependence on LNG imports is set to rise as domestic production is expected to grow at a compound annual growth rate of 8.89% over the next five years, while demand is expected to increase by a compound annual growth rate of 11.07% over the same period, according to Platts Analytics. Wood Mackenzie forecasts that India’s LNG demand will double from 37 Bcm in 2018 to 75 Bcm by 2030, providing a major growth opportunity for Total. “Total’s investment in Adani is undoubtedly a show of faith in India’s gas demand growth,” Wood Mackenzie Research Director Nicholas Browne said. “The government has a target to increase this to 15% by 2030. While we don’t consider this likely, gas demand is set to grow considerably.” In addition to Total, Reliance and BP are jointly investing up to $6 billion to develop already-discovered deepwater gas fields off theeast coast of India, which is expected to boost gas output by 30-35 million cu m/d (1 Bcf/d) in phases over 2020-2022. In addition, Shell’s country chairman for India Nitin Prasad recently told Platts that Shell was keen to participate actively and grow in the Indian gas market. Earlier this year, Shell became a full owner of the Hazira LNG and Port venture following the acquisition of a 26% equity held by Total. The terminal has a regasification capacity of 5 million mt/year. Shell is developing truck-loading facility at the Hazira LNG terminalas the company is keen on supplying LNG to industrial and transportation segments. EFFORTS TO GROW DISTRIBUTION NETWORK The city gas distribution sector in the South Asian nation is a segment that could witness more interest from international companies in the coming years, analysts told Platts. “The Total-Adani deal also solves the issue of unavailability of infrastructure as an impediment for demand to pick up in upcoming South Asian LNG buyers like India. City gas is expected to be one of the biggest growth drivers for India’s gas market,” Atre said. The Total-Adani joint venture comes when Adani Gas is aiming to expand its distribution of gas over the next 10 years through its 38 concessions covering 7.5% of the Indian population, and market natural gas to industrial, commercial and domestic customers targeting 6 million homes. It is also looking at 1,500 retail outlets of natural gas for vehicles. An official at an international oil and gas company based in India said that the city gas distribution space could witness a few more international companies buying stakes, although they could be relatively smaller compared with the Adani-Total deal. “The Total-LNG deal is a master stroke in my view. There will be more consolidation in the city gas distribution space. A lot of capital expenditure and effort is required to grow that network,” the official added.
India cabinet to review BPCL sale proposal next week
India’s cabinet is expected to evaluate a proposal to sell the government’s stake in state-run Bharat Petroleum Corp (BPCL.NS) next week, a government source said. The Indian government plans to sell its entire 53.29% stake along with management control in BPCL for about $10 billion.
HPCL net profit down 22% to Rs 762 crore
Hindustan Petroleum (HPCL), the country’s third largest fuel retailer, today posted a 22 per cent decline in consolidated net profit to Rs 762 crore for the second quarter ended September 2019 (Q2), as compared to the corresponding quarter a year ago. The company had posted a net profit of Rs 979 crore in the corresponding quarter a year ago. The company’s revenue from gross sale of products during Q2 of the financial year 2019-20 (FY20) declined 9 per cent to Rs 66,253 crore. The company’s gross refinery margins (GRMs) during the first six months of the current financial year declined to $1.87 per barrel, as compared to $5.93 per barrel posted in the corresponding period a year ago. Crude throughput during Q2 declined to 4.56 million tonne (MT), as compared to 4.76 MT posted in the corresponding period a year ago. Domestic sales, as well as exports during the quarter, increased to 8.95 MT and 0.45 MT, respectively, as compared to the corresponding quarter a year ago.
After 30 years in Singapore, oil trading losses force Mitsubishi to shut Petro-Diamond
About three years ago, Japanese oil trading firm Petro-Diamond Singapore (PDS) relocated to a bigger office in the 41-storey Millenia Tower as parent Mitsubishi Corp started combining its Tokyo trade operation with that in the city state. As its traders entertained clients in the company’s pantry facing Singapore’s Marina Bay, the once-conservative PDS became the global book leader for the company’s crude oil and fuel trading businesses last year, tripling its profits and assets from two years ago, according to Reuters interviews with company officials, trade sources and reviews of its financial records. Like other trading companies, PDS had eyed a slice of the fast-growing Chinese crude import market, hiring for the first time a Chinese trader in November 2018 to handle crude sales to independent refiners, known as teapots, the sources said. But in September, Mitsubishi said a PDS trader had lost $320 million in unauthorized transactions in crude oil derivatives and that the matter had been reported to the police. The trader, Wang Xingchen, also known as Jack Wang, denied any wrongdoing in a statement issued through a lawyer. On Wednesday, Mitsubishi, Japan’s biggest trading house by sales, said it planned to shut the 30-year-old PDS following the losses. “It took 30 years to achieve this and it’s all been ruined,” a company official said. The sources spoke on condition of anonymity as the case was still under investigation. Over the past year, PDS had become more active on the Singapore trading platform used by S&P Global Platts to assess Middle East crude oil prices and was participating in more tenders, said a Singapore trader who tracks such trades closely. The strategy worked. In the last financial year that ended in March 2019, the company’s earnings before interest and tax (EBIT) tripled to $32.1 million, versus $9.9 million in the year that ended in March 2017, the company’s financial reports obtained from Singapore business registry ACRA showed. Its assets tripled in the same period to $1.58 billion and net cash flow from operating activities became positive at $16.4 million versus losses in the previous two years, the report said. The company was registered in Singapore on May 6, 1989. The case has raised questions about why PDS had allowed a new trader to take big positions, industry sources said. “It was just really bad timing. PDS had lobbied the Mitsubishi management very hard to move its trading center from Tokyo to Singapore. And only one year later this happened,” said a source close to the matter. Mitsubishi has since tightened its risk controls, requiring almost every trade to be reported to Tokyo, which has slowed PDS’s activities, a second source familiar with the matter said. Despite PDS’ shutdown, traders expect Mitsubishi to return to the Singapore oil markets once the case has blown over, mirroring what happened to Japan’s second-biggest trading house, Mitsui & Co , more than a decade ago. Mitsui had shut Mitsui Oil Asia after the Singapore office notched $81 million of losses in naphtha trading by Nov. 17, 2006. In 2009, Mitsui oil trader Noriyuki Yamazaki was sentenced to five years in prison in Singapore for concealing the trades.