China’s Sinopec completes its first LNG bunkering operation
China’s Sinopec Corp announced on Monday it has completed its first liquefied natural gas (LNG) bunkering operation in Weihai, a major seaport in the eastern Shandong province. The bunkering, or marine refuelling, operation transferred 250 tonnes of LNG by truck to a China Merchant Shipping vessel. Sinopec is China’s largest supplier of marine fuels. The use of LNG as a marine fuel has been gaining traction amid a global push to reduce the shipping industry’s carbon emissions.
Stubble burning: Two biomass power plants in Punjab delayed
In a setback to efforts to check stubble burning, the two additional biomass power plants that were to come up in Punjab this year have been delayed. The two biomass power projects, including the 10 MW project in Fatehgarh Sahib and 4 MW project in Nakodar, were to be completed by this June. Now, the projects will probably be operational by next year. Once operational, the two projects will consume around 1.2 Lakh Metric Tonnes (LMT) of paddy residue. Punjab Energy Development Agency (PEDA) officials have attributed the delay in their establishment to the Covid pandemic. The high cost of power production of these plants is also a major reason for the delay. Sources said private companies or owners have been losing interest as the state power sector, which is supposed to purchase power from these plants, has been seeking power at cheaper prices. “The two proposed projects have been delayed due to Covid but will definitely be operational by next year. Thereafter, these plants will consume paddy residue from the surrounding areas,” said PEDA CEO N P S Randhawa. Already, 11 biomass power projects are operational in Punjab and are generating 97.5 MW of power annually, using approximately 8.80 LMT of paddy stubble. Power purchase agreements of these plants have already been made with PSPCL.
U.S. gas production set for big increase in 2022 on high prices
U.S. gas traders are anticipating a big increase in production over the next year as the industry responds to higher prices by ramping up drilling, which should ensure supplies are more plentiful in time for winter 2022/23. As a result, futures prices for deliveries at Louisiana’s Henry Hub in January 2023 are currently trading around $1.15 per million British thermal units below prices for deliveries in January 2022. Henry Hub’s one-year calendar spread trades in contango about three-quarters of the time, reflecting the high cost of storing a gaseous commodity with low value to volume, so the current backwardation is unusual. The spread is currently in the 98th percentile for all trading days since the start of 2007, indicating supplies are expected to be exceptionally tight this winter, before improving significantly next year. During the first phase of the epidemic, monthly U.S. dry gas production slumped to just 75 billion cubic metres in June 2020, down from a record 85 billion cubic metres in December 2019. The number of rigs targeting primarily gas-bearing formations slumped to less than 70, from more than 130, over a similar period, according to field services company Baker Hughes. Since then, however, there has been a slow but steady increase in both drilling and production in response to the recovery in gas prices. Front-month futures prices have climbed to more than $5.00 per million British thermal units, the highest level for more than seven years, up from a low of less than $1.50 in June 2020. By June this year, production had already recovered to 79 billion cubic metres, while the active rig count had increased to just over 100 by early September. In the next few months, higher prices will draw even more rigs back into the gas market, leading to an increase in production from the second quarter and especially the third quarter of 2022. Higher production will also support an increase in exports next year to Europe and Asia, where the shortfall is even more severe, contributing to an improvement in gas supplies globally. In the meantime, however, prices will have to rise high enough to restrict consumption, mostly by encouraging power producers to run gas-fired generating units for fewer hours this winter, reverting to coal-fired units instead.
LNG regasification operable capacity expected to rise by 12 mmtpa: Motilal Oswal
India’s LNG regasification operable capacity is expected to rise by 12 mmtpa due to removal of constraints at existing LNG terminals, according to Motilal Oswal Financial Services. Nearly 24 mmtpa of capacity additions are underway at Dahej and greenfield terminals at Chhara, Jafrabad, Dhamra and Jaigarh over the next few years. Just the KG Basin is expected to result in 45 mmscmd of incremental domestic gas (that is 47 per cent of the domestic gas consumption). India currently has an LNG regasification capacity of 42.5 mmtpa. However, the operable capacity is 30 mmtpa, said the report by Motilal Oswal. With the completion of major pipelines like Jagdishpur-Haldia, Mehsana-Bhatinda, Kochi-Bangalore and upcoming northeast gas grid, India’s total trunk pipeline network is expected to grow to 32,600 km from 17,126 km, increasing the reach of gas to a larger number of consumers. A blanket ban on coal gasifiers had resulted in a doubling of gas consumption in Morbi in CY19. With easing of Covid-related lockdowns, stricter actions may be in store for these polluting clusters, thereby encouraging adoption of natural gas. The National Green Tribunal (NGT) is focused on reducing pollution and 90 per cent rise in length of trunk pipelines is expected over the next few years. Besides, there is increased availability of LNG operable capacity (57 per cent) and availability of domestic gas (30 per cent). “We expect the alignments of stars — the syzygy — to bode well for India’s gas sector,” said the report by Motilal Oswal.
Petronet eyes fresh foray into petchem business; plans LNG import facility on east coast
Petronet LNG Ltd, India’s largest gas importer, is looking to reclaim the lost opportunities of the past decade as it seeks fresh foray into the petrochemical business and plans to set up an LNG import facility on the east coast. Oil Secretary Tarun Kapoor, who is also the Chairman of Petronet, in the firm’s latest annual report said the company is looking at setting up a floating terminal at Gopalpur port in Odisha and “is embarking upon a major diversification drive to broad base its business activity and is exploring to have an ethane/ propane import facility at Dahej terminal”. Petronet had some years back planned to set up a terminal at Gangavaram in Andhra Pradesh for import of supercooled gas in ships. The company management stopped pursuing that terminal in 2015-16 on grounds that there isn’t enough demand to justify a 5 million tonnes a year import facility. Gangavaram would have been the first terminal on the east coast as Petronet owns and operates facilities at Dahej in Gujarat and Kochi in Kerala. Soon after that Adani Group began work to set up a 5 million tonnes a year import terminal at Dhamra port in Odisha. Petronet now sees that there is demand for gas in the eastern region and despite the Dhamra LNG terminal, it is now looking for a facility at Gopalpur, a source said. Similarly, the company is trying to recapture the lost opportunity in the petrochemical sector. Petronet’s long-term contract for import of liquefied natural gas (LNG) from Qatar provided for supply of 5 million tonnes a year of rich gas or gas containing ethane and propane – compounds used to make petrochemicals. That rich-gas was supplied to Oil and Natural Gas Corp (ONGC) which after stripping it of ethane and propane re-supplies to Petronet for onward sale to power plants, fertilizer units and other customers. The source said ONGC uses the rich gas at its petrochemical plant to make value-added chemicals. Now, Petronet is looking to use the same model. Petronet “has also planned for setting up of a petrochemical complex based on imported propane at Dahej LNG Terminal”, Kapoor said in the annual report. “The foray into petrochemicals would be a forward integration of our strategy as the same planned to get synchronised with our upcoming third jetty project and available land bank at Dahej.” He, however, did not give details of the planned petrochemical complex including investment and size of the plant. Petrochemicals, made using crude and natural gas as feedstock, form raw material for plastics, packaging material, and personal care products. In terms of volume, the petrochemical market in India stood at 42.50 million tonnes and is estimated to reach 49.62 million tonnes by 2025, expanding at a compound annual growth rate (CAGR) of 6.14 per cent between FY 2021 and FY 2025. Using ethane, plastics and detergents can be made; while propane can give plastic. Petronet is 50 per cent owned by state-owned refiners Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL), gas utility GAIL (India) Ltd and oil and gas producer ONGC. The four companies sit on the board of the company, which is headed by the Secretary, Ministry of Petroleum and Natural Gas. Kapoor said Petronet is exploring the possible business opportunities from harnessing the cold energy from its regasification terminals at Dahej and Kochi. “Harnessing LNG’s cold energy not only maximises re-gasification terminals’ potential but also offers an opportunity to cut emissions in the cold warehousing chain simultaneously adding value and improving energy efficiency,” he said. After establishing a presence in the southern and western parts of the country, Petronet is now planning to set up a floating LNG terminal at Gopalpur port in Odisha with a view to establishing its presence on the eastern coast of India, he said. “The LNG terminal will help meet the increasing gas demand of the eastern and central part of the country,” he said. He added that Petronet has already completed the pre-project studies and is in process of preparing the Detailed Feasibility Report (DFR) for 4 million tonnes per annum floating storage & regasification (FSRU) terminal followed by a pre-feasibility report for a 5 million tonnes land-based terminal in future. Petronet, he said, “has signed MoU (memorandum of understanding) with Gopalpur Ports Ltd and is in discussion with them to finalise the key technical and commercial terms of the agreements”. Without giving investment details or timelines for the project implementation, he said the firm is in process of obtaining the final investment decision for the project. Dahej terminal is the largest import facility in the country, with a nameplate capacity of 17.5 million tonnes per annum. Kochi terminal is a 5 million tonnes nameplate capacity but it operates at a fraction of capacity in absence of pipelines to take the fuel to customers.