Russia cements role as gas ‘kingpin’ with three new pipelines
Russian President Vladimir Putin and Chinese leader Xi Jinping launch Monday a gas pipeline that is the first of three ambitious projects intended to cement Moscow’s role as top gas exporter. Putin and Xi are to inaugurate by video link-up the “Power of Siberia” pipeline, sending Siberian gas to China in a move that will strengthen their ties amid Moscow’s confrontation with the West. Russia is also planning to soon launch two more gas pipelines that will ramp up supplies to Europe while bypassing Ukraine. TurkStream, which Putin and Turkish leader Recep Tayyip Erdogan hope to launch in January, is to transport Russian gas to Turkey. Nord Stream-2, which would double Russian gas volumes to Germany, is expected to go online in mid-2020. Analysts said the three projects have long-term economic and political benefits for Russia, which has inserted itself between European markets to the west and the rapidly growing Chinese market to the east. “Russia is not only creating new income streams, but hedging its bets and bolstering its position strategically,” said energy analyst Andrew Hill. “The ability to play one off against the other will not have been lost on either Gazprom or the Kremlin,” Hill, who leads the S&P Global Platts EMEA gas and power analytics team, wrote in a blog post. He said the three projects were a sign that the Russian gas industry — “this kingpin of the global gas sector” — was becoming more mature. Putin’s spokesman Dmitry Peskov said the significance of the 3,000-kilometre (1,850-mile) Power of Siberia pipeline running from remote regions of East Siberia to Blagoveshchensk on the Chinese border was hard to overestimate. “This is important for our country, this is important for China,” he said ahead of the launch, stressing that the project would create jobs and infrastructure in Russia’s Far East. – ‘Biggest construction project’ – The pipeline, which Putin has called “the world’s biggest construction project,” crowns years of tough negotiations and work in difficult conditions. A 30-year, $400 billion deal was signed in 2014 after a decade of tortuous talks. It was the Russian gas giant Gazprom’s biggest contract. Gazprom is to supply China with 38 billion cubic metres (1.3 trillion cubic feet) of gas annually when the pipeline is fully operational in 2025. Gazprom stressed that the pipeline ran through “swampy, mountainous, seismically active, permafrost and rocky areas with extreme environmental conditions”. Temperatures along the route plunge to below minus 6o degrees Celsius in Yakutia and below minus 40 C in the Russian Far East’s Amur Region. Speaking in Moscow last week, Chinese vice foreign minister Le Yucheng said the pipeline would boost cooperation and allow the two countries “to complement each other’s strengths and pursue common rejuvenation.” Ahead of the launch, officials also said work had been completed on the first road bridge between Russia and China. The bridge, which is to open next year, will connect the city of Blagoveshchensk and the northern Chinese city of Heihe. The Power of Siberia launch comes amid continued wrangling over Nord Stream 2. The 9.5-billion-euro ($10.6-billion) pipeline has faced opposition from countries in eastern and central Europe, the United States and particularly Ukraine because it is likely to increase Europe’s dependence on Russian natural gas. US President Donald Trump has threatened to hit Nord Stream 2 and those tied to it with sanctions. While praising Russia’s gas projects with China and Turkey, Thierry Bros, an energy analyst at the Davis Center for Russian and Eurasian Studies at Harvard, said the Baltic energy link had become a victim of strong opposition from many in the West. “Nord Stream 2 is not a success,” he told AFP, noting that it was hard to say when Gazprom would be able to fully capitalise on its investment.
Govt says no proposal to reduce taxes on petrol, diesel
The government on Monday said there is no proposal to reduce taxes on petrol and diesel. Finance Minister Nirmala Sitharaman told the Lok Sabha that no where in the world do the prices of petrol and diesel remain steady for a particular period of time. To a query on whether petrol and diesel would be brought under the Goods and Services Tax (GST) regime, she said that in a way, they are already under the zero rate category of the GST. The rates have to be decided by the GST Council, she noted. The council, chaired by the Union Finance Minister, has ministers in-charge of finance or taxation from all states as members. “At present, there is no proposal to reduce taxes on petrol and diesel,” Sitharaman said in response to a question on whether the government proposes to reduce taxes so that prices of petrol and diesel would come down. To another query, the minister said that at present, no new tax on petrol and diesel is being considered. The central government imposes various central excise and custom duties on petrol and diesel. Besides, state governments levy taxes on them. When asked whether small farmers would be given subsidy on diesel, Sitharaman said the Centre and the state governments tax at different levels.
What is the Saudi-UAE project in India whose cost has escalated?
A refinery project in India, set to be jointly built by Saudi Aramco and Abu Dhabi National Oil Company (ADNOC), reportedly faces an estimated cost escalation to $70 billion from the previous $44 billion. Now $70 million project in Maharashtra will produce 1.2 million barrels/day. A refinery project in India, set to be jointly built by Saudi Aramco and Abu Dhabi National Oil Company (ADNOC), reportedly faces an estimated cost escalation to $70 billion from the previous $44 billion. This has emerged from a Reuters news report that, in turn, cites a report by WAM, UAE’s state-run news agency, that a joint economic council of UAE and Saudi officials reviewed their plans for the project on the sidelines of Crown Prince Mohammed bin Salman’s UAE visit. The project Originally, the refinery was supposed to be built in a village in Maharashtra’s Ratnagiri district but the location was later changed to a site in Raigad district, about 100 km from Mumbai. In August, Mukesh Ambani-led Reliance Industries announced that it will be selling a 20 percent stake in its oil and chemical business to Saudi Aramco. Repeated delays in land acquisition have led to the expected year of completion being postponed to 2025. In September, drone attacks on two of the oil facilities managed by Saudi Aramco by Houthi rebels from Yemen had impacted Saudi Arabia’s oil exports and production and the global oil market in turn. The promoters Saudi Aramco is Saudi Arabia’s state-owned oil company and manages the wealth the country generates from petroleum. Heavily influenced by the Al Saud royal family, Saudi Aramco is controlled by the Supreme Council for Saudi Aramco (SCSA) led by Crown Prince Mohammed bin Salman. ADNOC, based in Abu Dhabi, is the state-owned oil company of the UAE. While Saudi Arabia holds the largest oil reserves in the world, ADNOC is believed to hold the seventh-largest. The agreement In June last year, Aramco and ADNOC signed a framework agreement to jointly develop what was originally called the Ratnagiri Refinery and Petrochemicals Limited (RRPCL), a refinery that would produce 1.2 million barrels per day. The two state-owned companies are responsible for building, owning and operating the refinery in collaboration with Indian oil companies such as the Indian Oil Corporation Limited, Bharat Petroleum and Hindustan Petroleum. While Aramco and ADNOC will own a 50 per cent share in the company, the remaining will be owned by the Indian consortium. A statement issued by Saudi Aramco after the signing of the framework with ADNOC in 2018 said, “The partnership between Saudi Aramco and ADNOC marks a significant step in regional energy partnership and cooperation, bringing together two of the world’s leading National Oil Companies as strategic partners with the Indian consortium.” Saudi Aramco’s president and CEO said the refinery project was being built to ensure that India has “secure, reliable energy feedstocks for its long term prosperity.”
GAIL to supply PNG in Dehradun under city gas distribution project
GAIL Gas Ltd will supply PNG to 3,00,000 households in Dehradun district under the city gas distribution project. Making the announcement here on Friday, GAIL Gas Ltd Managing Director (Marketing) V Gautam said work on laying pipelines for the project will begin in a month. In five to six months, the firm will start supplying piped natural gas to 5,000 households in Chakrata, Dehradun, Doiwala, Kalsi, Rishikesh, Tyuni and Vikasnagar areas of Dehradun district, he added. The target is to cover 3,00,000 households spread over an area of 3,088 square km in the district at a cost of Rs 15 billion in the next eight years. Registeration of PNG consumers under the project will soon get under way, the MD said. As laying pipelines from Haridwar to Dehradun is likely to take some time, PNG will be supplied in the district for the time being through de-compressed units (DCUs) of which 4-5 will be set up in Dehradun, Gautam said. Kerala: Distribution of natural gas to households in Kozhikode soon The infrastructure development work for the distribution of piped natural gas to households in Kozhikode, Malappuram and Wayanad districts is likely to start soon. The plan is to complete the laying of pipelines for household connections and to the bunks of Indian Oil Corporation in some parts of Kozhikode. The work in Kozhikode will commence at Unnikulam and nearby areas in the first phase. The intermediate pigging station of the gas pipeline developed by the Gas Authority of India Ltd (GAIL) at Unnikulam. It will be the base station for the household network and network to CNG bunks. “The infrastructure development and distribution of CNG to houses will be completed by the Indian Oil-Adani Gas Private Ltd,” said M Viju, deputy general manager of GAIL. “The IP Station functioning at Unnikulam and three sectionalizing valve (SV) stations at Puthur, Kottur and Ayanchery in the district will also function as refilling stations and centres of local area distribution,” he said adding that similar works would be carried out in other districts also. IP stations and SV stations are part of the GAIL pipeline for the real-time monitoring of the gas supply. The stations have the facilities to check the pressure of piped gas using software. Two weeks ago, a team of experts from the IO-AG visited Unnikulam, Kunnamangalam and other areas as part of planning their work. IO-AG private limited is entrusted the task of infrastructure development and distribution of piped natural gas to individuals as GAIL cannot give direct supply to household consumers. They are entitled to carry out direct supply only to major customers. The household distribution will be done after reducing the line pressure of the piped gas in accordance with the regulations of Petroleum and Natural Gas Regulatory Board. The area from Unnikulam to Karanthur will be covered by the IO-AG private limited, said MLA PTA Rahim. “They have assured to start work at the earliest to complete the process before June,” he said. The plan is to lay distribution line alongside the national highway 766 from Unnikulam to Karanthur.
Piped Natural Gas supply to start in Mangaluru in 6-8 months
Gail Gas Limited (GGL), which is gearing up to launch piped natural gas (PNG) in the city within 6-8 months, has announced various pocket-friendly payment options. Vilin Zunke, deputy general manager, GGL, said that there will be no registration fee for domestic customers, who want to avail PNG directly to their homes. In the first phase, PNG connections will be made available to residents of Kadri, Bejai, Attavar and Falnir, he said, adding the work of pipeline laying is expected to be completed by March , and all other areas of the city will be covered in the later phases. In the endeavour to promote clean fuel, GGL has started discussions with various industries in Baikampady and Mangaluru SEZ area for providing PNG to their plants, he added.
Govt may revive plan to give statutory powers to DGH
After giving more attractive terms under its new hydrocarbon exploration licensing policy (HELP), the government is now likely revive plans to reform the regulatory framework in the oil and gas sector by arming the office of upstream regulator Directorate General of Hydrocarbons (DGH) with statutory powers. This will be in conjunction to another plan to carve out a specialist wing under the Petroleum Ministry for assisting it in administration of contracts. Though Petroleum Minister Dharmendra Pradhan had earlier ruled out statutory status for DGH, saying the sector has not fully developed and needs government support, a source close to the developments in the ministry said that the plan is being revived again to prevent a clash of interest in DGH’s regulatory operations. Also, the policy environment has undergone several reforms and it is felt that the sector would now grow on its own. DGH is currently not just formulating regulations for exploration and production (E&P) activities under the guidance of the Petroleum Ministry, but is also responsible for administering contracts, even for government-owned companies such as Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL). It also assists the government in auctioning oil and gas exploration fields. According to the revised plan, which is still in discussion stage, the office of the DGH would be distanced from the government and placed in a statutory body that will give the regulatory regime more teeth and functional autonomy. But the government will retain some of the talent from existing DGH to create a special wing on the lines of the Central Electricity Authority and the Telecommunications Engineering Centre. This wing will fill the vacuum created by separation of DGH and help the Petroleum Ministry on technical issues related to administration of contracts for oil and gas blocks. This will require competent resources with the ministry. “World over, regulators function independent of the government so that these is no clash of interest. This is especially true in the case of India, where the government is the majority shareholder in oil and gas companies. The proposed move for separation of regulatory and administrative powers of DGH would usher in a new era for country’s energy sector,” said an energy sector expert not willing to be named. Government think tank Niti Aayog has also favoured strengthening the office of DGH by giving it statutory powers. In fact, in its draft National Energy Policy, which is being finalised soon, it has said that upstream regulatory regime and contract administration need to be separated for an arms-length administration of upstream matters. In 2011, the Ashok Chawla committee had suggested that the DGH be turned into an ‘independent technical office’ attached to the Petroleum Ministry and an upstream regulator be established to focus on regulatory functions. Another panel in 2001 had recommended the setting up of an Upstream Hydrocarbon Regulatory Board, giving DGH a techno-administrative role as a part of the Petroleum Ministry. The 2013 Vijay Kelkar committee had also suggested hiving off conflicting interests of the DGH while numerous parliamentary standing committees to favoured statutory role for the upstream regulator. The proposed regulatory reforms comes on the back of a series of initiatives taken by the Petroleum Ministry in recent months to improve regulations and make the country an attractive destination for investment by global oil and gas giants. The government has already started the process of auction of major fields from July this year under the revamped policy that gives both marketing and pricing freedom for gas production. In addition, blocks are being auctioned under the open acreage policy that gives the bidder the choice of selecting the prospecting area. All this is part of the new Hydrocarbon Exploration and Licensing Policy announced by the government earlier. The DGH was established in 1993 under the administrative control of Ministry of Petroleum & Natural Gas through a government resolution. Its objectives are to promote sound management of oil and natural gas resources with a balanced regard for environment, safety, technological and economic aspects of petroleum activity. DGH has been entrusted with several responsibilities like implementation of New Exploration Licensing Policy (NELP), matters concerning the production sharing contracts (PSCs) for discovered fields and exploration blocks, promotion of investment in E&P sector and monitoring of E&P activities, including review of reservoir performance of producing fields. In addition, the DGH is also engaged in opening up of new unexplored areas for future exploration and development of non-conventional hydrocarbon energy sources like Coal Bed Methane (CBM), as also futuristic hydrocarbon energy resources like Gas Hydrates and Oil Shales.
China’s new Russian natural gas pipeline won’t worry LNG, oversupply will
A new pipeline from Russia that will eventually be capable of delivering more than a quarter of China’s current level of natural gas imports sounds like the last thing embattled liquefied natural gas (LNG) producers need. The Power of Siberia pipeline was scheduled on Monday to start delivering natural gas from Russia to China’s northeast, bringing the cleaner-burning fuel some 3,000 kilometres (1,865 miles) to a region that up to now has been heavily reliant on coal. The pipeline is due to reach its full capacity of 38 billion cubic metres (bcm) a year by 2025, which is equivalent to about 28.1 million tonnes of LNG. China’s total natural gas imports from LNG and existing pipelines from central Asia were 77.1 million tonnes in the first 10 months of 2019, meaning they should be around 93 million tonnes for the full year. This means the new pipeline will be able to boost the current level of imports by around 30%, a substantial figure even when viewed in the light of China’s supercharged natural gas demand growth in recent years. This may look concerning for LNG exporters, who are already battling low prices caused by a supply surplus and slowing growth in China, the fastest-growing major market for the super-chilled fuel and the number two importer behind Japan. But the new pipeline is unlikely to have much of an impact on China’s LNG demand, as it will effectively serve a market not currently reached by LNG imports. The pipeline goes to northeastern Heilongjiang province, which borders Russia, and then it continues to Jilin and Liaoning, China’s top grain hub. While some of these provinces, Liaoning in particular, do have industries, they have mainly been powered by coal up until now, and the region’s industry and 68 million urban residents consume just 14 bcm of natural gas annually. What this means is that the fuel from the Power of Siberia pipeline is likely mainly to displace coal, especially in industry and residential heating during winter. This will fit in with Beijing’s vision of improving air quality across the northern provinces in winter by replacing coal-fired boilers with natural gas. It’s also worth noting that the pipeline is expected to deliver only 4.6 bcm in 2020, equivalent to just 3.4 million tonnes of LNG, rising to 10 bcm in 2021 and the full capacity by 2025. This gives the marketer of the pipeline gas, China National Petroleum Corp, time to build the market in the provinces where the gas is being delivered. LNG DEMAND WORRIES LNG exporters to China should perhaps be more worried by the slowing rate of demand growth in their main existing markets in the coastal provinces, especially the heavily industrialised southeast. While it appears LNG imports bounced back in November from a weak October, it’s likely that full year growth will only just make double digits, down from rates above 40% for the past two years. China imported 6.13 million tonnes in November, according to vessel-tracking and port data compiled by Refinitiv. This was up sharply from October’s 3.94 million tonnes, but still only in line with the 6.17 million imported in November last year. For the first 11 months of the year, Refinitiv data shows China’s LNG imports were 53.2 million tonnes, putting then on track to come in around 60 million for the full year, assuming this December is similar to the same month in 2018. This would be about 13% higher than the 53.1 million tonnes China imported in 2018, which is a strong rate of growth but a rapid cooling in the rate of growth from the previous two years. The problem for major LNG exporters such as Australia, Qatar and the United States is that quite a bit of their demand hopes are built around China continuing to grow rapidly, especially since Japan and number three buyer South Korea are mature markets with limited growth prospects. The surge in supply from new projects in Australia and the United States this year, coupled with slower demand growth in China, has already resulted in the spot price in Asia dropping to its lowest for this time period on record. Spot LNG ended November at $5.60 per million British thermal units (mmBtu), compared with $9.80 at the end of November 2018 and $9.85 at the end of November 2017. The supply surplus has effectively done away with the usual winter price spike in Asia, apart from a brief little blip higher to $6.80 per mmBtu in mid-October. With a surge of new LNG projects being approved, or likely to be approved in the near future, the industry will need to see faster demand growth than is currently happening. The silver lining is that if buyers can be convinced that long-term LNG prices have shifted structurally lower, they may be convinced to take a bet on the fuel.