Bangladesh scraps another LNG import tender over high prices
Bangladesh is cancelling another tender to import liquefied natural gas (LNG) in December, as it received one offer to supply the shipments that were too expensive, a senior energy ministry official said on Friday. The offer from the Asian unit of Vitol to supply 138,000 cubic metres of LNG for Dec. 9-10 delivery was more than $2 per unit higher than the prices that Bangladesh pays under long-term contracts, said Anisur Rahman, senior secretary to the Energy and Mineral Resources Division. State-run Rupantarita Prakritik Gas Company, which is in charge of LNG imports into the country, cancelled a tender for November delivery, citing the same reason. “From December, we have a plan to import two cargoes of LNG from the spot markets each month,” Rahman said, adding that both the tenders would be reissued. Under its long-term deals with Oman Trading International and Qatar gas, Bangladesh pays about $5.50 to $6 per million British thermal units (mmBtu). Rupantarita bought Bangladesh’s first spot LNG cargo ever from Vitol at $3.8321 per mmBtu for delivery over late September to early October. However, prices for spot cargoes, or shipments typically for next month delivery, are gaining on expectations that colder weather during the Northern Hemisphere winter will increase LNG demand for heating. Spot LNG prices for Asia were estimated at $5.80 per mmBtu as of last Friday, their highest in more than 11 months. Bangladesh, with a population of about 160 million people, is set to become a major LNG importer in Asia as domestic gas supplies fall. The country currently has two floating storage and regasification units with a total regasification capacity of 1 billion cubic feet per day, equal to about 7.5 million tonnes a year.
Essar Group to pump Rs 35,000 crore into Gujarat
After exiting two of its most prized assets in Gujarat — the refinery and steel facilities, the Ruias-controlled Essar group is once again exploring the state for several big-ticket projects. These include setting up a commercial port, new and emerging technologies, EV vehicles and lithium-ion manufacturing facility, renewable energy, petrochemicals and even a steel project. The company has drawn out plans to invest about $5 billion (roughly Rs 35,000 crore) for a steel manufacturing project in Gujarat, said sources close to the development. The promoters of Essar Group had last year lost a long-draw the battle to wrest control of the bankruptcy-ridden Essar Steel at Hazira which it had built from a scratch. The stressed steel plant project of 10 million tonnes per annum capacity went into insolvency proceedings and was bagged by ArcelorMittal Nippon Steel India Ltd. Senior executives of Essar Group met top Gujarat government officials last week to discuss various plans. The company has also submitted a proposal to set up a steel plant with 8 million tonnes of annual capacity for which it has sought land from the state government. “The company is looking for land near coastal areas that have good port connectivity,” said a senior state government official. For the proposed steel plant the company requires land of about 1,000 hectares, said sources in the know of the development. The $5 billion proposal does not include land and infrastructure cost of a captive port and captive power plant, said sources. The ArcelorMittal led joint venture’s winning bid involved a debt restructuring plan to the tune of Rs 42,000 crore and further investment of Rs 8,000 crore for ramping up its capacity. Essar group promoters had proposed to repay about Rs 55,000 crore to the creditors however the offer was not accepted by the committee of creditors for Essar Steel. Essar group and ArcelorMittal are presently locked in a legal battle to wrest control of the captive port at the steel plant facility at Hazira. When contacted, an Essar group spokesperson said that senior executives have been visiting senior government officials to discuss their current investments in ports and power sector in Gujarat. Essar Group has also proposed to set up an LNG terminal at Hazira and also drawn out plans to enter into solar and wind energy generation and coal bed methane projects in Gujarat, said sources. For the port project, the group has chalked out plans to invest about Rs 10,000 crore, according to sources. The Essar group promoters, who sold the refinery project near Jamnagar for $12.9 billion to Russia’s Rosneft led consortium, is also planning to set up a petrochemical complex. For this the group is looking at options within India, including Gujarat and also overseas, said sources. Last year in October, Essar group promoters said that they paid off Rs 1.4 lakh crore debt and that the residual 10-15% would be cleared shortly. Essar group took steps towards reducing leverage by exiting from Essar Oil and selling it off to Rosneft-Trafigura consortium in 2017. This was followed by the company’s exit from Aegis, their BPO business. The group carried out a few more exits and used the proceeds from this monetisation, exercise to repay about Rs 1,40,000 crore of debt, which is seen as the largest deleveraging exercise by an Indian corporate. The company is in good shape with the top line of the portfolio the business of over $13 billion or Rs 1,00,000 crore, the group, director of Essar Capital said Prashant Ruia, in an internal message posted on the group’s website last October.
Russia’s Putin: rollover on oil output curbs possible
Russian President Vladimir Putin said on Thursday that Russia saw no need for now for global oil producers to change their existing deal on global supply, but did not rule out extending deep oil cuts for longer if market conditions warranted. His comments are the clearest signal yet from Russia, one of the world’s top oil producers, that it is ready to continue with unprecedented output cuts in the face of a sluggish oil market beset by the coronavirus pandemic and overproduction. Russia is working with OPEC and other oil producing allies, in a group called OPEC+, to limit oil supplies to drain a glut in the market caused when global demand slumped due to coronavirus lockdowns. The producers are reducing combined production by 7.7 million barrels per day (bpd). OPEC+ is scheduled to relax those cuts by 2 million bpd in January, although some producers are concerned demand may not be strong enough to absorb the additional supply. Putin said on Thursday he had been in contact with Saudi Arabia, OPEC’s top producer, as well as the United States. The United States is not part of the OPEC+ group. “We believe there is no need to change anything in our agreements, we will closely watch how the market is recovering. Consumption is on the rise. “However, we do not rule out that we could keep existing restrictions on production, and not remove them as quickly as we had planned to do earlier,” Putin told a meeting of the Valdai Discussion Club. “If need be, maybe, we can take other decisions on further reductions. But we don’t see such a necessity now,” he added. Russian Energy Minister Alexander Novak said earlier this week the global oil market recovery had slowed due to the second wave of the coronavirus outbreak, while it was premature to discuss a possible output-cuts rollover into 2021. Industry sources told Reuters that Russia may support the move to extend the existing cuts beyond December. OPEC+ oil ministers are scheduled to hold an online conference on Dec. 1 to discuss supply policy. “Russia is interested neither in an (oil) prices jump, nor in their fall. And in that case, our interests coincide with that of the American partners,” Putin said.
France halts Engie’s U.S. LNG deal amid trade, environment disputes
The French government asked power group Engie to hold off on signing a multibillion-dollar U.S. liquefied natural gas import contract on concerns over the deal’s environmental implications, a source familiar with the matter said. The intervention comes amid growing scrutiny over the effects of shale gas extraction methods such as fracking and their impact on climate change through methane emissions, especially among U.S. producers. However, it also comes against a backdrop of broader trade disputes between Europe and the United States, with Paris and Washington engaging in retaliatory measures over plans to tax big digital companies, for instance. Engie’s contract would be with NextDecade Corp, which is due to decide whether to go ahead with plans to build its proposed Rio Grande LNG export plant in Texas as it tots up agreements with prospective customers. The project was “not aligned with France’s environmental project and environmental vision,” the source said, adding that the request had come from the economy ministry. Jessica Szymanski, a spokeswoman at the U.S. Department of Energy, which has touted LNG exports, said it would be “short-sighted and narrow-minded to delay LNG projects for political posturing.” Such a move “threatens to hinder the environmental progress we’ve made using American natural gas.” Looking ahead, however, analysts said a victory by Democratic presidential candidate Joe Biden in the Nov. 3 U.S. election would increase the odds of a deal between Engie and NextDecade. Biden, should he win, is expected to bring tough new regulations on energy industry emissions, which might ease concerns of French regulators and others. A spokeswoman for Engie, which is part-owned by the French state, said the company’s board decided on Sept. 30 to give itself more time to study the NextDecade contract, saying “the project required a more detailed examination.” But she declined to comment on whether this followed a request from the state, while the French government had no immediate comment. Politico and French newsletter La Lettre A earlier reported that the state had intervened on the 20-year deal, which they said was worth $7 billion. NextDecade said it could not discuss details of its commercial dealings, and added that the firm was working on measures to target carbon-neutrality at Rio Grande. The company is grappling with concerns about the polluting effect of the natural gas provided to LNG processors by producers in Texas and elsewhere, and recently announced it had developed processes to reduce Rio Grande’s carbon dioxide equivalent emissions. NextDecade has put off its final investment decision (FID) on Rio Grande from this year to 2021, after government lockdowns to stop the spread of COVID-19 cut global demand for gas. TRADE TUSSLES French and U.S. environmental campaigners welcomed the delay in Engie’s contract, though Lorette Philippot, of French activist group Amis de la Terre (Friends of the Earth), said she hoped this would lead to the deal never materialising. “France must have zero tolerance when it comes to shale gas,” Philippot said. The French government said earlier in October it would stop providing state export guarantees to projects involving more polluting forms of oil such as shale from next year, followed by all types of oil from 2025 and gas from 2035. Rebekah Hinojosa from the Sierra Club, a U.S.-based environmental group, said the setback for NextDecade should add to reasons not to build the facility. But analysts at Height Capital Markets in Washington said the French state’s intervention may have been motivated by broader trade tensions that could ease if Biden wins. “We believe a Biden victory would increase the odds that Engie signs the deal,” the analysts said, adding Biden would likely work to reduce trade tensions. The market seems to agree. NextDecade shares were up 7.5% at $2.80 on Thursday afternoon despite seemingly negative news. The European Union is the world’s biggest gas import market and the United States is vying for market share with cheaper pipeline gas from Russia, which has also led to tensions. Engie, alongside other European energy firms, is one of the financial backers of the Nord Stream oil pipeline project which is led by Russian oil company Gazprom. The United States has imposed sanctions on Nord Stream accusing Moscow of using its energy resources “for coercive purposes.” The Kremlin accuses Washington of using the sanctions for unfair competition to promote pricier U.S. LNG.
India’s newest LNG terminal at Mundra nears 50 per cent capacity utilization
At a time when some of the LNG re-gasification projects including the Dabhol (Maharashtra) and Kochi (Kerala) terminals are struggling for optimum capacity utilization despite being up and running for more than five years now, the brand new Mundra LNG terminal in Gujarat, is operating at about 45 per cent capacity due to spurt in demand. The prices of gas in the international markets have been on a constant decline amid the Covid-19 crisis. The Gujarat government-backed GSPC LNG project at Mundra, which is co-promoted by the Adani Group, began commercial operations in February this year with 5 million tonnes per annum (MTPA) installed capacity and built at a cost of about Rs 5,000 crore. “This is the fastest ramp up of an LNG terminal in the country since Dahej (phase-1) in 2004 which had the first mover advantage. Currently, the Mundra LNG terminal is operating at a throughput more than the throughput of the three LNG terminals (Kochi, Ennore and Dabhol) that came up in the last eight years,” said Sanjeev Kumar, managing director of GSPC. The Mundra terminal is facing pipeline capacity restraint that restricts it from further ramping up the capacity. The pipeline has a carrying capacity to cater to 5MTPA of gas transportation from Mundra to Anjar. But, further down from Mehsana to Bhatinda, the pipeline can cater to only 7.5 million metric standard cubic meters per day (mmscmd) or about 2MTPA volume of gas. GSPC aims to set up a compressor near Ghana village in Kutch that will allow it to add throughput capacity of another 1.5mmscmd in the next few months, according to Kumar. By the end of this financial year, the Mundra LNG terminal will have achieved a throughput of 50 per cent or about 2.5MTPA of the total installed capacity, he added. The Mundra terminal was inaugurated by Prime Minister Narendra Modi in 2018 however it was only earlier this year that it received its commissioning cargo. India’s LNG import for September was 2,972 million metric standard cubic metres which was 6.2 per cent higher than the corresponding month of the previous year, according to a September report by Petroleum Planning and Analysis Cell, ministry of petroleum and natural gas. Mundra LNG terminal has already handled 20 cargoes, that too delivered by 19 different LNG ships including large sized Q flex carriers. The gas prices that were hovering around USD 5-6 per MMBTU last year fell to an all-time low of USD 2 in the April to July period this year. GSPC has booked 11 LNG spot cargos from April to October period in the range of USD 2.25 per million British thermal unit (MBTU) to USD 3.5 per MMBTU, said sources. The gas from Mundra terminal is supplied to the ceramic hub of Morbi and other parts of Saurashtra by Gujarat Gas, another state government-owned entity. Apart from households and industrial units, the gas from Mundra is supplied to GSPC Pipavav Power Company. The 700MW power plant produced only 62 million units in the April to July period last year which has increased to 1,610 million units in the same period this year, according to Central Electricity Authority data.