Plunge in DES West India LNG price to historic lows spurs spot buying activity
A more than 40% year-on-year drop in DES West India spot LNG prices to record lows has spurred Indian buyers to issue a flurry of spot tenders since the start of the new year. The DES West India price was assessed at $3.725/MMBtu Wednesday, the lowest since S&P Global Platts started publishing DES West India assessments in January 2010. Increased production from the US, Russia and Australia coupled with weakening demand growth from North Asia to cause a global supply glut Over the first three weeks of 2020, Indian LNG buyers issued tenders for 15 cargoes to be delivered over the first quarter. Additionally, Indian Oil Corp. issued a tender seeking six cargoes to be delivered over April-December. In comparison to the same period last year, Indian LNG buyers had issued four spot tenders, and Torrent Power had issued a strip of five cargoes to be delivered over February-December 2019. While some traders thought of the abundance of tenders in January so far as increased demand from India, others suggested it was regular demand with several tenders being issued at the same time for Q1 delivery. “Some did not award their tenders earlier and issued it later after the holidays, and others were looking for regular demand in Q1,” an Indian end-user said. Moreover, three tenders were issued in the spot market for prompt January delivery — one seeking a commissioning cargo for the Mundra LNG terminal, and another two due to the unavailability of a Petronet LNG term vessel from Qatar to India. India’s Gujarat State Petroleum Corporation had issued the tender seeking the commissioning cargo for the Mundra terminal for H2 January delivery. The tender was awarded in the mid-$5s/MMBtu, market sources said. The Mundra LNG terminal received its commissioning cargo Wednesday, aboard the 210,000 cu m Q-Flex LNG Vessel Murwab, according to Platts vessel tracking software cFlow. Meanwhile, the unavailability of the Petronet LNG term vessel from Qatar to India prompted GAIL and IOC to issue tenders in the spot market for January delivery, according to market sources, but this could not be confirmed with Petronet. During the first week of January, GAIL issued a tender for a cargo to be delivered by January 10 DES Dabhol. Due to the very prompt nature of the tender, GAIL awarded the tender in the low $6s/MMBtu — a premium to prevailing spot market prices, sources said. The tender closed January 6, and the DES West India assessment on the day was at $4.888/MMBtu. Similarly, IOC issued a tender early January for a cargo to be delivered end-January. The tender was awarded at $5.50-$5.60/MMBtu, sources said. The tender closed January 8, and the DES West India assessment on the day was at $4.913/MMBtu. FURTHER DOWNSIDE TO SPOT LNG PRICES Spot LNG prices in India could face further downward pressure as we roll forward into the summer months, away from the global peak winter demand season. The benchmark for spot LNG prices in North Asia, JKM, could possibly drop to historic lows this year below $3/MMBtu, with rising supply outpacing weaker demand, Platts Analytics reported in their weekly LNG price forecast last week. Further down the curve, the JKM derivative for Summer 2020 was assessed at $3.975/MMBtu, with April being the lowest at $3.745/MMBtu on Wednesday. The lowest price among the series of tenders issued in January was the IOC tender for February 24-29 delivery DES Dahej, sources said. The tender closed January 15, and was awarded at $3.95/MMBtu, sources added. “While buyers may look to take advantage of lower spot prices in India, demand creation this year would be restrained by infrastructure constraints and possibly lower fuel oil prices,” an Indian end-user said.
Assam Government requests Central Government to divest BPCL’s stake in NRL to Oil India
The Assam Government has requested the Central Government to divest Bharat Petroleum Corporation Limited’s stake in Numaligarh Refinery Limited to Oil India Limited. According to official sources, the State government has also proposed to increase it’s stake in NRL by 13 per cent for ₹ 20 billion. “The State government has requested the Centre that all shares of BPCL in NRL be given to Oil India. The Assam Government is also ready to pay ₹ 20 billion if 13 per cent share is given to us,” officials said. This proposal was made at the sidelines of National Conclave on Emerging Opportunities in Natural Gas sector after the approval of the Assam state government.
ONGC to invest Rs 3,200 crore to drill 115 wells across eight fields in Tripura
Oil and Natural Gas Corporation (ONGC), the country’s largest petroleum explorer, plans to invest Rs 3,200 crore to drill around 115 wells across eight oil and gas fields in Tripura. The company said in an application to the environment ministry the proposed 115 development drilling locations are expected to lead to further development of Agartala Dome, Baramura, Kunjaban, Konaban, Manikyanagar, Sundalbari and Sonamura Fields in Sipahijala, West Tripura, North Tripura and Gomati districts of Tripura state. This can help meet the consumer demand in the future and thereby fulfil the energy requirement of the North-Eastern states, it said. While gas was discovered in Tripura in the 1970s and commercially viable gas reserves were found in more than 11 structures over time, poor infrastructure and absence of adequate industrial development in the region did not allow full utilisation of gas reserves in the region. The company expects Tripura asset to produce around 5 million standard cubic meter per day of natural gas and condensate of around eight tonne per day for the next 15 years. ONGC plans to transport the gas produced from Tripura asset to different Group Gathering Station of respective fields. The company’s Tripura asset has five Gas Collecting Stations (GCS) – Agartala Dome (ADB), Baramura, Konaban, Rokhia & Sonamura for processing well fluids coming from seven developed field. ONGC accounts for 75 per cent of the country’s natural gas production. It had witnessed a 9 per cent decline in its natural gas production at 1,998 Million Standard Cubic Meter (MMSCM) in December 2019. In the first nine months of the current financial year, the company’s natural gas production declined 2.70 per cent to 17,918 MMSCM. ONGC’s gas production from Tripura increased 2.62 per cent to 1,174 MMSCM during the April-December period of 2019. The company had earlier voiced concerns on the country’s natural gas pricing formula for domestically produced gas saying that low prices are acting as a deterrent for monetisation of various gas fields. Chairman and Managibg Director Shashi Shanker recently said in an interview low gas prices have resulted in the company bearing losses of over Rs 5,100 crore in 2017-2018 and 2018-2019.
Gazprom offers 18 LNG cargoes for loading at Belgium’s Zeebrugge in 2020-2021
Russian oil and gas producer Gazprom has offered 18 cargoes of liquefied natural gas (LNG) for loading at Belgium’s Zeebrugge terminal, two industry sources said on Thursday. The cargoes are for loading between the second half of Feb. 2020 and Dec. 31 2021, one of the sources said. The tender will close on Feb. 10, with bids valid until Feb. 12. Gazprom’s trading arm, Gazprom Marketing and Trading, buys 2.9 million tonnes of LNG a year from Russia’s Yamal plant, with cargoes purchased at Zeebrugge via tran-shipments.
Adani Gas to invest Rs 9,000 cr on distribution networks over next 10 yrs
Adani Gas Ltd will invest up to Rs 9,000 crore in setting up city gas distribution network over the next 10 years to retail CNG to automobiles and piped cooking gas to households in those areas where it won licences in the recent bidding round, its CEO Suresh Manglani said. Adani Gas Ltd (AGL) on its own and in a joint venture with state-owned Indian Oil Corp (IOC) has won city gas licence for 38 geographical areas spread over 71 districts in 15 states in recent bid rounds. “AGL is moving at breakneck speed in order to achieve the commitments made in these bidding rounds and the investment in these projects is pegged at around Rs 8,000 to Rs 9,000 crore in the coming decade,” he said. As part of the government vision to raise the share of natural gas in the energy mix to 15 per cent by 2030 from current 6.2 per cent, the oil regulator PNGRB has in last couple of years conducted two licensing rounds that have expanded the coverage of city gas network to over 400 districts covering 70 per cent of the population of the country. Entities winning city gas licences have committed to supply piped natural gas to about 5 crore homes and set up 10,000 CNG dispensing stations. “Just to set the context, since Independence only 57 lakh homes have been provided with piped natural gas and only 1,900 CNG stations have so far been set up across India,” he said. He, however, rued the “cumbersome and time consuming” process of obtaining permission for laying pipelines or setting up CNG stations. “While the authorisations for development of city gas distribution (CGD) networks are granted by centre or regulator, the actual work of project execution has to be carried out in the states and union territories,” he said. “The process of grant of permissions/right of the user (RoUs) by the various centre and state authorities has remained extremely cumbersome and time-consuming. This would be one of the key bottlenecks in ensuring that the mammoth target sets are achieved.” He said while a push is being made towards a gas-based economy with open access and gas exchange being planned, key issues such as the inclusion of natural gas in the GST regime and ban on polluting fuels remain critical. “Going forward with more clarity emerging on these fronts, the CGD sector is expected to grow exponentially with the simultaneous development of last-mile connectivity of gas as well as infrastructure creation,” he said. At the end of September 2019, Adani Gas had six city gas projects operational with 86 CNG stations and 0.41 million residential customers. It supplied 1.55 million standard cubic meters per day of gas through these. The company plans to scale up the CNG outlets to 1,550 by 2027 and connect 6 million households with piped natural gas, he added.
PNGRB to launch 11th City Gas Distribution round soon: Dharmendra Pradhan
Oil minister Dharmendra Pradhan today said that downstream regulator Petroleum Natural Gas and Regulatory Board (PNGRB) will soon launch the eleventh City Gas Distribution (CGD) bidding round soon. He was speaking at the National Conclave on Emerging Opportunities in Natural Gas sector held in New Delhi. Pradhan called upon all the entities who had won CGD rights under the previously conducted bidding rounds not to delay their work and asked PNGRB to strictly monitor the progress. According to PNGRB, post the completion of the tenth CGD round, natural gas will be available in 228 Geographical Areas, covering 27 states and union territories, which will result in access to gas for 70 per cent of the country’s population and 50 per cent of its geographical area. Today’s meeting witnessed participation from state ministers of Gujarat, Assam, Odisha, Himachal Pradesh, Uttarakhand, Bihar, Manipur, Chhattisgarh, Punjab and Goa. Pradhan, talking about the country’s domestic natural gas production, said that gas production in the current financial year is likely to reach 34.55 billion cubic meter. He said this is the first time the government is providing Rs 10,500 crore as viability gap funding for setting-up pipelines in Eastern and North-Eastern India. He added that the government wants to ensure a gas pipeline network from Kutch to Kohima and Kashmir to Kochi and that Rs 4 lakh crore worth of investment is likely to be made in such projects.
India may seek renegotiation of LNG price from Qatar: Dharmendra Pradhan
India may seek to reopen the pricing of its long-term LNG import contract with Qatar to reflect falling rates of the spot or current market, Oil Minister Dharmendra Pradhan said on Thursday. “Energy Minister of Qatar is coming for bilateral discussion (to India) at the end of the month. We will discuss all the aspects,” Pradhan told reporters here. He was asked if the government is looking at renegotiating liquefied natural gas (LNG) contracts in view of the fall in prices of the fuel available in spot or current market. India imports 8.5 million tonnes per annum of LNG from Qatar under two long-term contracts and has tied up 5.8 million tonnes a year supplies from the US. It also has a 2.5 million tonnes import contract with Gazprom of Russia and a 1.44 million tonnes deal with the Gorgon project of Australia. While long-term LNG from Qatar comes for USD 8.5-9 per million British thermal unit, the same gas is available in the spot market for less than half the price. Refusing to be drawn into giving a direct reply on renegotiating the contract with Qatar, Pradhan said India is in discussions with Qatar for importing more LNG to meet the country’s rising energy needs. India has in the past used its status as Asia’s third-largest LNG buyer to renegotiate deals with Qatar, Australia, and Russia. In 2015, it renegotiated the price of the long-term deal to import 7.5 million tonnes per year of LNG from Qatar, helping in saving Rs 8,000 crore. In 2017, it got ExxonMobil Corp to lower the price of Gorgon LNG and a year later convinced Gazprom to lower rates also. Sources, however, said the price of LNG from these contracts was still significantly higher than spot prices and if the trend continues, users may seek a review. Prabhat Singh, managing director of Petronet LNG Ltd, the firm which has long-term LNG import contracts with Qatar and Australia, had on August 7, 2019, stated that price sensitivities of consumers will have to be respected. Earlier, speaking at an industry event, Pradhan said as much as Rs 4 lakh crore is likely to be invested in the natural gas sector in the country to boost usage of the environment-friendly fuel. This investment will be in the expansion of city gas network, laying pipelines, setting up LNG import facilities and natural gas exploration, he said. LNG import terminal capacity in the country is likely to grow from 38.8 million tonnes per annum presently to 52.5 million tonnes in the next 3-4 years with new facilities coming up at Kakinada in Andhra Pradesh, Dhamra in Odisha, Jaigarh in Maharashtra and Chhara and Jafrabad terminals in Gujarat. Also, 14,788 km of pipeline is being added to the existing 16,788-km network to take the fuel to all corners of the country, he said adding that the city gas distribution network is being expanded to over 400 districts. The investment will help raise the share of natural gas in the country’s overall energy mix to 15 per cent by 2030 from the current 6.2 per cent.
DoT seeking Rs 3 lakh cr from GAIL, other non-telecom PSUs result of communication gap: Pradhan
The Department of Telecommunications seeking nearly Rs 3 lakh crore in dues from non-telecom PSUs, such as GAIL, Oil India Ltd and PowerGrid, was a result of “communication gap” as these firms do not owe any such amount, Oil Minister Dharmendra Pradhan said on Thursday. Following the October 24 Supreme Court ruling that non-telecom revenues of telecom firms such as Bharti Airtel and Vodafone Idea should be included for considering payments of government dues, the telecom department sought Rs 1.72 lakh crore from gas utility GAIL India Ltd, Rs 48,000 crore from OIL, Rs 40,000 crore from PowerGrid and raised similar demands from RailTel and other public sector undertakings (PSUs). The government’s demand from such companies increased many times more than their net worth and the Centre asked them to go to the Supreme Court against such dues. While Oil India Ltd filed a clarificatory/ modificatory petition on Wednesday, GAIL approached the apex court on Thursday. “We are in discussion with the telecom ministry. We had given them our reply (on the demand raised),” Pradhan told reporters here. “Possibly because of communication gap, the Government of India’s one department has raised such demand on PSUs under another government department.” He said parallel to discussions with the DoT, the Supreme Court has been approached on the issue. “Where is GAIL in core telecom work? Is PGCIL in core telecom work or does Oil India do any core telecom job,” he asked. “We feel there should be no impact (of the October 24 Supreme Court ruling) on these companies.” Pradhan said the approach to the Supreme Court and discussions with the DoT were being conducted simultaneously. He, however, did not say if seeking relief from the Supreme Court was limited to PSUs under his ministry filing pleas in the apex court or his ministry would also file a petition. The DoT raised the demands on the non-telecom PSUs for leasing out surplus optical fibre network that was primarily for their internal communications under NLD (National Long Distance Service) licences or IP-1/IP-2. The demand notices by the DoT follow the Supreme Court’s October 24 order that broadened the definition of adjusted gross revenue (AGR) for telecommunications companies to include non-core operations. AGR is used as a basis for the calculation of licence fees and spectrum usage charges owed to the government. GAIL, Oil India, PowerGrid and other non-telecom PSUs were not a party to this litigation. OIL in its petition to the Supreme Court stated that it will have to shut down operations if it is forced to pay an amount that is twice its net worth. “OIL had obtained a National Long Distance Service Licence (NLD Licence) to establish supervisory control and data acquisition system (SCADA system) for control, management, and protection of OIL’s pipeline network used for transportation of crude oil, natural gas, and petroleum products,” the company had said in a statement on Thursday. “As per the licence terms, the licence fee is to be paid on gross total revenue from services provided under the NLD Licence. Since the award of NLD licence, the cumulative revenue of Rs 1.47 crore is earned by OIL from the leasing of spare bandwidth capacity on which all applicable licence fee and other statutory dues as per licence terms have been paid by OIL regularly.” The company stated that based on the recent Supreme Court ruling, “Department of Telecommunications issued demand notices to OIL also seeking payment of licence fee on total reported revenue including revenue from sale of crude oil, natural gas etc, which neither relate to the NLD licence nor can be treated as supplementary/ value-added services related to the NLD licence.” “Till date, OIL has received demand notices for the period from FY2007-08 to FY2018-19 amounting to over Rs 48,000 crore including licence fee, penalties and interest,” the statement had said. From gas utility GAIL, the DoT has sought Rs 1,72,655 crore in dues on IP-1 and IP-2 licences as well as internet service provider (ISP) licence. In response, GAIL has told the DoT that it owes nothing more than what it has already paid to the government. The firm told the DoT that it had obtained ISP licence in 2002 for a period of 15 years, which expired in 2017. But GAIL never did any business under the licence, and since no revenue was generated, so it cannot pay any amount. On IP-1 and IP-2 licences, GAIL has told the DoT that it generated Rs 35 crore of revenue since 2001-02 and not Rs 2,49,788 crore that has been considered for levying past dues, adding that the revenue number the DoT is considering is after adding all the revenues that the company earned from gas trading and transportation business. Sources said the dues being sought are more than three times the net worth of GAIL and several times the actual revenue earned. While telecom companies such as Bharti Airtel and Vodafone Idea may have had non-telecom revenues generated from using the government licence and spectrum, firms such as GAIL and OIL had no such revenue. The DoT is seeking Rs 1.47 lakh crore from all telcos in past statutory dues.
Kerala: District admin cracks whips on IOAGPL to expedite works
With the Indian Oil Adani Gas Private Limited’s (IOAGPL) works in Thrikkakara municipality running behind schedule, the district administration has given the agency implementing the city gas project four more days to complete the works in the municipality. The IOAGPL was supposed to restore the dug-up roads by January 20. The slow pace of IOAGPL’s road restoration works after digging them up for laying pipelines for piped natural gas (PNG) supply had come under fire from people’s representatives in the municipality. At a meeting held on January 22, the collector informed IOAGPL officials that as the agency has failed to stay on schedule and restore the roads completely, the permission for digging up roads in the next six wards of Thrikkakara municipality, which was to be carried out in the next days, wouldn’t be granted. It was after the intervention by the district administration that the city gas project, which had been progressing at a snail pace ever since it was launched in February 2016, gained momentum. Still, the speed and quality of the road restoration works drew criticism from the people’s representatives in Thrikkakara municipality. The IOAGPL officials had cited difficulties in getting permission from local bodies to dig up roads for laying pipelines for PNG supply as the major reason for the inordinate delay in completing the project. In around four years since February 2016, the OIAGPL has been able to provide connections only to roughly 1,500 families, whereas the target was 50,000 households. The collector had convened a meeting in January first week and decided to expedite the project and complete distribution PNG connections to 40,000 households in Thrikkakara municipality by March 31. But yet another round of dispute erupted and the people’s representatives of Thrikkakara municipality and the district collector again convened a meeting again on January 9 to sort out the issues. At the meeting, it was decided to complete the restoration of roads by January 20. The collector had also given instructions to the IOAGPL to complete the remaining work within 15 days of starting it. A schedule for completing the works in Thrikkakara was prepared and it was decided that the works will be completed in a phased manner. In the first phase, pipelaying, distribution and plumping works to provide connections to the households are to be completed in six wards. In the next phase, works in the six more wards are to be carried out. The entire work in all the 43 wards in Thrikkakara municipality is to be completed by April 30. When the collector convened a meeting to review the progress of the work on January 22, it was found that IOAGPL hasn’t completed relaying roads. “They haven’t completed relaying of around 700 metres of road dug up for laying the pipes. So, the people are agitated. If the work is progressing in such a manner, we will have to raise objections against digging up the roads for the project,” one of the ward members of Thrikkakara municipality said. But IOAGPL representatives said they had laid pipes along 30km in the six wards of the municipality and that only a stretch of 700 metres need to be restored. “Most of the road-digging works are being carried out as per horizontal dimensional drilling (HDD). We don’t have to dig up the road. We just have to dig up pits at certain points. So, we will be able to complete the repair works fast,” said Ajay Pillai, head of city gas project in Kochi. As of now, they have given PNG connections to 152 houses in Thrikkakara municipality. Once the work in Thrikkakara is over, IOAGPL will start the works in Eloor municipality.