India’s PAT scheme saved 17 mtoe energy, mitigated 87 MT CO2 annually
India’s Perform Achieve and Trade (PAT) scheme led to energy savings of 17 million ton of oil equivalent (mtoe) and resulted in the mitigation of around 87 million tonne of CO2 annually, according to the power ministry. The ministry said in a statement the Standards and Labeling (S&L) Program introduced by the Bureau of Energy Efficiency (BEE) resulted in estimated electricity savings of 56 Billion Units during 2020-21 worth over Rs 30,000 crore. The initiative helped reduce around 46 MT CO2 emissions annually. The scheme now covers 28 appliances and over 15,000 models of energy efficient products have been awarded star labels, a popular symbol among the consumers for endorsing energy savings, the ministry said. By 2020, the PAT scheme coverage had been extended to 13 most energy intensive sectors in the country including cement, iron and steel, fertilizer, thermal power plants, refineries, petrochemicals, railways and others. The PAT scheme provides mandatory targets for identified large units and the excess energy saved by them is issued as energy saving certificates which are tradable instruments. Industries and establishments are assigned separate energy efficiency targets based on their level of energy consumption and the potential for energy savings.
Reliance says FCCU unit at Jamnagar refinery shut, exports may be delayed
India’s private refiner Reliance Industry said on Wednesday a secondary unit at its export-focussed refinery in the western state of Gujarat has been shut since June 6, which may delay the shipment of some product cargoes. The refinery, which has the capacity to process 704,000 barrels of crude per day (bpd), is part of the world’s biggest refining complex in the city of Jamnagar in Gujarat state. Reliance, which operates the refining complex, did not give a reason for the “emergency shutdown” of the refinery’s fluidized catalytic cracking unit (FCCU). “The FCCU unit is being repaired on top priority and is expected to be restarted expeditiously,” the company said in a stock exchange filing. “Consequently, some product shipments may get delayed and we are working to minimize the impact on our customers,” it said. A source familiar with the matter said that the unit will be fixed in a week’s time. The refining complex in Jamnagar has two refineries. The 704,000 bpd export-focussed plant is adjacent to the 330,000 bpd refinery that mostly sell products in the local market.
Covid disruptions, gas price crash pushes PLL out of $2.5-bn deal with Tellurian
In what may be a big casualty of Covid-19 related market disruptions, India’s Petronet LNG Ltd has shelved it’s $2.5 billion investment plan in US LNG developer Tellurian’s upcoming Driftwood LNG terminal in Louisiana. Government sources said that with low spot LNG prices and gas widely available in the market, it would make little sense to sign an agreement committing to pay on sea price of over $ 4.5 per mmBtu for 40 years for the gas. The delivered price of gas would be even higher. Thus, there was no need to pursue the deal at this juncture they said. At its results call on Wednesday, PLL managing director and CEO A K Singh also mentioned that at present the company had no MoU for investment in Tellurian’s gas project in US. As per the second extension given to the MoU reached between Tellurian and PLL in September 2019, the agreement was to be reached latest by December end, 2020. But as per Singh, as the US gas company did not approach them for further extensions, there was no investment MoU with PLL now. A PLL official also said that with prices at record low levels and easily available, the company is more concerned about signing LNG supply contracts rather than investing in greenfield project that will meet has needs after five to seven years. In September last year a non-binding memorandum of understanding (MoU) was signed between PLL and Tellurian that gave the Indian entity PLL the option to buy 5 million tonne per annum (mtpa) LNG from Tellurian’s Driftwood project on the banks of the Calcasieu river in Louisiana. In return, Petronet was to spend $2.5 billion for an 18% equity stake in the $28 billion Driftwood LNG terminal. The term of the MoU was to expire on March 31, 2020, which was extended to May 31 in February. It was again extended till December end. But with deadline latest extension also ending, PLL also seemed in be on no mood to commit investment. The change of government in US has also made decision to move out from the project easier. As a test to determine gas prices available on long-term contract basis now, PLL last year invited bids for one million tonne per annum of LNG for 10 years. It asked bidders to quote a price below Japan/Korea Marker (JKM) that takes the price on long term as well as closer to spot prices. Though Tellurian placed its bid for the supply contract, it did not qualify from a list of 13 other suppliers. The Tellurian deal, if concluded, would have been the first long-term LNG deal under the Modi government since 2014. The previous long-term gas supply deals were signed before 2014. The deal for 7.5 mtpa of LNG from Qatar, 1.44 mtpa from Australia, 2.2 mtpa from Russia and 5.8 mtpa from the US were concluded by the previous UPA government. The landed price of some of the earlier concluded long-term LNG supply deals is higher at $9-$10 per mmBtu that is being renegotiated by PLL now. Under the Tellurian deal, the first set of gas from the Driftwood project would have reached Indian shores only by FY24. As per analyst presentations given by Tellurian, the first phase of the 27.6 million tonne per annum (mtpa) Driftwood project will be able to deliver LNG only in 2023. This would have meant that Petronet would have to wait for the LNG under a long term contract from the US project for four long years. The wait is long given competitively priced LNG is available in plenty in the spot market to meet the immediate energy needs of the country. The Driftwood project is a proposed LNG terminal where actual construction work is yet to start. Though Tellurian has appointed Bechtel as the engineering, procurement and construction (EPC) partner for the project, it is still waiting for investment commitments from partners for starting construction work. So far only French energy major Total has committed to invest $500 million in the project for 2 mtpa of LNG. Sources said of the 5 mtpa proposed contracted quantity, Petronet may not get even full capacity from the first phase 11 mtpa Driftwood project to be ready for delivery by 2023. As the US project is proposed to be constructed in four phases, sources said full capacity may not be reached before 2030. By then the gas market may be looking a lot different and could make Petronet’s investment unproductive. Tellurian is selling 51 per cent holding in Driftwood to third parties while it itself would retain 49 per cent stake or control over 13.6 mtpa of LNG. Tellurian expects to generate $8 per share cash flow from the project.
LNG market poised for buoyant recovery with demand growing across Asia
Liquefied natural gas (LNG) prices are poised for more gains as gas-hungry China guzzles cargoes to feed a rebound in economic growth while the easing of coronavirus-induced restrictions restores industrial demand in India. Higher oil and coal prices have also helped lift global gas prices with spot Asian LNG prices doubling in just three months. “We believe this has been driven by a tightening of Asian LNG balances led by strong generation demand in southern China at the same time that South Korea reached peak nuclear maintenance, while Covid-hit India LNG demand has stabilized,” analysts from Goldman Sachs said in a note earlier this week. China imported more than 7 million tonnes of LNG in May, a record for that month, and looks set to import more over the next two months driven by strong industrial activity. “Fuel-switching (from coal) across households and businesses appears to have regained momentum after a brief hiatus, and now has an added policy boost …that is heavily oriented around increasing clean fuels use and decarbonisation,” Fitch Solutions said. South Korea’s newest and biggest nuclear reactor, Shin Kori-4, shut last month after a fire, which is expected to boost LNG demand. An official at operator Korea Hydro & Nuclear Power Co said it was not clear when the reactor would resume operations. Tokyo Gas, Japan’s biggest city gas provider, may boost storage capacity using LNG tankers, chief financial officer Hirofumi Sato told Reuters in April, potentially lifting imports. Utilities in Japan, the world’s top LNG importer, faced a power crisis last winter which caused LNG prices to spike to record highs. Temperatures in Tokyo, Seoul and Shanghai are expected to be warmer than usual over the next two weeks, according to Refinitiv Eikon weather data, further boosting gas demand in Japan, South Korea and China for power generation. India’s gas consumption is seen recovering in June after declining in the previous two months, as states ease restrictions in the wake of a drop in coronavirus infections, officials said this week. Gas consumption in the world’s fourth largest LNG importer could grow by 6% to 8% in the current fiscal year if the country emerges from the pandemic, Manoj Jain, chairman of GAIL (India), India’s biggest gas pipeline operator, said. Europe’s LNG demand remains robust too, as imports are expected to refill storage levels which hit multi-year lows recently on pipeline supply concerns stemming from rising Russia-Ukraine tensions and a surging carbon market which may spur power producers to opt for LNG over coal, Fitch Solutions said. Supply issues, both planned and unplanned, plague some plants in the United States, Australia, Malaysia and Indonesia, and are also supporting prices, traders said. That’s crowding out some demand from price-sensitive buyers like Pakistan and Thailand, who have received only high offers for tenders seeking cargoes for July. Overall, Asia LNG prices are expected to average about $7.30 per million British thermal units (mmBtu) in 2021 and $7.50 per mBtu in 2022, up from $4.20 per mBtu last year, said Kieran Clancy, assistant commodities economist at Capital Economics. “The outlook for LNG demand further ahead remains bright, as it is used to plug the gaps in power generation that are not currently able to be met by renewables,” he added.
GAIL split plan scrapped, company to monetise pipelines
A proposal to bifurcate state-owned gas utility GAIL (India) Ltd has been scrapped for now, and instead the company will monetise some of its pipelines by selling a minority stake through InvIT. GAIL Chairman and Managing Director Manoj Jain said the company has sent a plan for monetising two of its pipelines to the Ministry of Petroleum and Natural Gas and an Infrastructure Investment Trust (InvIT) is possible within the current fiscal if approvals come soon. GAIL is India’s biggest natural gas marketing and trading firm and owns nearly three-fourths of the country’s 17,126-km gas pipeline network, giving it a stranglehold on the market. To resolve the issue, it was proposed that GAIL’s pipeline business should be hived off into a separate entity. “There is no pending proposal in this regard,” Jain said at a call with reporters on the company’s earnings. He was asked about the fate of the plan to transfer the pipeline business into a new subsidiary, with GAIL holding the core business of marketing natural gas and petrochemical production. “We are initially monetising through InvIT. Proposals for InvIT for two pipelines have been sent to the ministry. Once it clears, we will start working on monetisation plan,” he said. Asked if this meant that the split plan was junked, he said, “it appears so.” “We are going for the pipeline-wise route (for monetisation) instead of the entire segment,” he said. He said GAIL will monetise some of its pipelines by selling a minority stake through InvIT. The idea is to transfer pipelines with a steady revenue stream into a trust whose units can be sold to investors and the same can be traded on the stock exchange. This way, GAIL will upfront get money from such a sale that can be used for capital expenditure. To start with, GAIL plans to monetise the Dahej-Uran-Panvel-Dabhol pipeline and the Dabhol-Bengaluru pipeline. InvITs are like a mutual fund, which enables direct investment of small amounts of money from possible individual / institutional investors in infrastructure to earn a small portion of the income as a return. GAIL will retain a majority stake in the pipelines that run from Dahej in Gujarat to Dabhol in Maharashtra and from there to Bengaluru in Karnataka. The InvIT may involve selling a 10-20 per cent stake initially, he said. Jain said once the ministry clears, the proposal will have to go to the Cabinet and if approvals come in time the InvIT could be launched within the current financial year. Industry sources said the proposal to split GAIL was dropped as the company had a large project pipeline in its network. A subsidiary may not have been able to raise the funds at rates that a combined balance sheet of GAIL can get, they said. Creating pipeline infrastructure, which will take the environment-friendly fuel to unconnected places in the country, is key to the government’s objective of making India a gas-based economy. The government is targeting raising the share of natural gas in its energy basket to 15 per cent by 2030 from the current 6.2 per cent. Sources said the bifurcation of GAIL was planned to address complaints of natural gas users about not getting fair access to the GAIL pipeline network to transport their fuel. The conflict arising out of the same entity owning two jobs will get resolved with the setting up of an independent transport system operator (TSO), which will manage the common carrier capacity of GAIL and other pipelines in the country, they said. The government has a 54.89 per cent stake in GAIL India.
Indian government offers 32 areas in latest small oil, gas field auction
The government will auction unmonetised large oil and gas fields of state-owned ONGC and OIL to boost the country’s hydrocarbon production, Petroleum Minister Dharmendra Pradhan said on Thursday. Speaking on the launch of the third round of auction of small discovered fields, he said companies cannot indefinitely sit on resources they may have discovered. These resources actually belong to the nation and they will be monetised by bidding them out to interested entities, he said. As many as 32 oil and gas blocks with 75 discoveries have been offered in the Discovered Small Field (DSF) round-III. These small and marginal fields were discovered by state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) but they were not economically viable to be developed due to the fiscal regime and their small size. Under DSF, liberal terms including pricing and marketing freedom are offered, making them viable. “There will be no DSF next time. Next time, it will be a ‘major’ round (auction of large fields),” Pradhan said. He said the Directorate General of Hydrocarbons (DGH), the oil ministry’s technical arm, has the “full mandate” to identify unmonetised major fields that could be offered for bidding. “Resources don’t belong to a company. They belong to the nation and the government. They cannot lie with a company indefinitely. If somebody cannot monetise them, we will have to bring a new regime,” he said. The statement comes weeks after his ministry said India’s largest oil and gas producer ONGC to sell a stake in producing oil fields such as Ratna R-Series in western offshore to private firms and get foreign partners in KG basin gas fields. had on April 25 reported a seven-point action plan, ‘ONGC Way Forward’. It was drawn by the ministry that called for the firm to consider a sale of a stake in maturing fields such as Panna-Mukta and Ratna and R-Series in western offshore and onshore fields like Gandhar in Gujarat to private firms while divesting/privatizing ‘non-performing’ marginal fields. It wanted ONGC to bring in global players in gas-rich KG-DWN-98/2 block where output is slated to rise sharply next year, and the recently brought into production Ashokenagar block in West Bengal. Also, identified for the purpose is the Deendayal block in the KG basin which the firm had bought from Gujarat government company GSPC a couple of years back. “This ‘chalti ka naam gaddi’ (something that is just barely working) attitude will now work. We have to take bold decisions,” Pradhan said. “Idle, unmonetised resources, especially with state-owned companies, need to be monetised.” For a nation that imports 85 per cent of its oil needs, resources lying idle for a long time cannot be permitted, he said. “Our objective to maximise production. So, we have to look at all options available. We cannot have a situation where fields are lying with some for a long time and are not being developed,” he said. In DSF-III, 11 onshore blocks, 20 offshore and one deepwater area are being offered for bidding. These blocks, spread over about 13,000 square kilometers, hold 75 oil and gas discoveries with a combined resource base of 230 million tonnes of oil and oil equivalent gas. In the previous two rounds between 2016 and 2018, 54 blocks, taken away from ONGC and OIL, were awarded. According to DGH, 29 field development plans entailing USD 1.76 billion investment have been submitted. Oil production from the areas awarded in two rounds of DSF is envisaged to reach 1.3 million tonnes by 2024 and gas output to touch 2.9 billion cubic meters. The proposal made in April was the third attempt by the oil ministry to get ONGC to privatise its oil and gas fields. In October 2017, the DGH had identified 15 producing fields with a collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic meters of gas, for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction. A year later, as many as 149 small and marginal fields of ONGC were identified for private and foreign companies on the grounds that the state-owned firm should focus only on bid ones. The first plan could not go through because of strong opposition from ONGC, sources aware of the matter said. The second plan went up to the Cabinet, which on February 19, 2019, decided to bid out 64 marginal fields of ONGC. But that tender got a tepid response, they said. The sources added that ONGC was allowed to retain 49 fields on condition that their performance will be strictly monitored for three years. ONGC produced 20.2 million tonnes of crude oil in the fiscal year ending March 31 (2020-21), down from 20.6 million tonnes in the previous year and 21.1 million tonnes in 2018-19. It produced 21.87 billion cubic metres of gas in 2020-21, down from 23.74 bcm in the previous year and 24.67 bcm in 2018-19.
Covid disruptions, gas price crash pushes PLL out of $2.5-bn deal with Tellurian
In what may be a big casualty of Covid-19 related market disruptions, India’s Petronet LNG Ltd has shelved it’s $2.5 billion investment plan in US LNG developer Tellurian’s upcoming Driftwood LNG terminal in Louisiana. Government sources said that with low spot LNG prices and gas widely available in the market, it would make little sense to sign an agreement committing to pay on sea price of over $ 4.5 per mmBtu for 40 years for the gas. The delivered price of gas would be even higher. Thus, there was no need to pursue the deal at this juncture they said. At its results call on Wednesday, PLL managing director and CEO A K Singh also mentioned that at present the company had no MoU for investment in Tellurian’s gas project in US. As per the second extension given to the MoU reached between Tellurian and PLL in September 2019, the agreement was to be reached latest by December end, 2020. But as per Singh, as the US gas company did not approach them for further extensions, there was no investment MoU with PLL now. A PLL official also said that with prices at record low levels and easily available, the company is more concerned about signing LNG supply contracts rather than investing in greenfield project that will meet has needs after five to seven years. In September last year a non-binding memorandum of understanding (MoU) was signed between PLL and Tellurian that gave the Indian entity PLL the option to buy 5 million tonne per annum (mtpa) LNG from Tellurian’s Driftwood project on the banks of the Calcasieu river in Louisiana. In return, Petronet was to spend $2.5 billion for an 18% equity stake in the $28 billion Driftwood LNG terminal. The term of the MoU was to expire on March 31, 2020, which was extended to May 31 in February. It was again extended till December end. But with deadline latest extension also ending, PLL also seemed in be on no mood to commit investment. The change of government in US has also made decision to move out from the project easier. As a test to determine gas prices available on long-term contract basis now, PLL last year invited bids for one million tonne per annum of LNG for 10 years. It asked bidders to quote a price below Japan/Korea Marker (JKM) that takes the price on long term as well as closer to spot prices. Though Tellurian placed its bid for the supply contract, it did not qualify from a list of 13 other suppliers. The Tellurian deal, if concluded, would have been the first long-term LNG deal under the Modi government since 2014. The previous long-term gas supply deals were signed before 2014. The deal for 7.5 mtpa of LNG from Qatar, 1.44 mtpa from Australia, 2.2 mtpa from Russia and 5.8 mtpa from the US were concluded by the previous UPA government. The landed price of some of the earlier concluded long-term LNG supply deals is higher at $9-$10 per mmBtu that is being renegotiated by PLL now. Under the Tellurian deal, the first set of gas from the Driftwood project would have reached Indian shores only by FY24. As per analyst presentations given by Tellurian, the first phase of the 27.6 million tonne per annum (mtpa) Driftwood project will be able to deliver LNG only in 2023. This would have meant that Petronet would have to wait for the LNG under a long term contract from the US project for four long years. The wait is long given competitively priced LNG is available in plenty in the spot market to meet the immediate energy needs of the country. The Driftwood project is a proposed LNG terminal where actual construction work is yet to start. Though Tellurian has appointed Bechtel as the engineering, procurement and construction (EPC) partner for the project, it is still waiting for investment commitments from partners for starting construction work. So far only French energy major Total has committed to invest $500 million in the project for 2 mtpa of LNG. Sources said of the 5 mtpa proposed contracted quantity, Petronet may not get even full capacity from the first phase 11 mtpa Driftwood project to be ready for delivery by 2023. As the US project is proposed to be constructed in four phases, sources said full capacity may not be reached before 2030. By then the gas market may be looking a lot different and could make Petronet’s investment unproductive. Tellurian is selling 51 per cent holding in Driftwood to third parties while it itself would retain 49 per cent stake or control over 13.6 mtpa of LNG. Tellurian expects to generate $8 per share cash flow from the project.
China to overtake Japan as world’s top LNG buyer in weeks, ICIS says
China’s rising imports of liquefied natural gas (LNG) position it to surpass Japan this year as the world’s largest buyer of the superchilled fuel, pricing data and cargo tracking firm ICIS Edge said on Wednesday. The shift – which some analysts had not expected until 2022 – could happen very soon on a 12-month rolling basis as China’s strong economic recovery, cold weather and a crackdown on pollution boosted demand for the less polluting fossil fuel. Japan has been world’s biggest LNG importer for decades and the change would signal a major shift in one of the fastest growing energy markets. Purchases from Tokyo, which burns gas from LNG to produce electricity, have been in long-term decline. In the 12 months from June 2020 to May, China imported 76.27 million tonnes of LNG, only slightly behind Japan’s 76.32 million tonnes, ICIS LNG Edge said. It estimated China’s 2021 total LNG demand at 81.2 million tonnes, above 75.2 million tonnes for Japan. Independent and second-tier Chinese LNG buyers keen to lock in contractual supply with global sellers should keep China’s demand high, the firm added. China’s efforts to cut emissions have boosted demand for LNG, which produces about half of the emissions of coal. The share of gas in China’s energy mix is around 10%, in third place behind coal and oil. Japan aims to cut its carbon emissions almost by half by 2030 and the resumption of nuclear power generation in recent years has reduced its LNG imports. “Strong economic performance, supportive government regulation and investment in LNG and gas infrastructure have led to an extended period of growth for China’s LNG demand,” ICIS LNG Edge said in a note.