Japan’s ENEOS withdraws from Myanmar gas project
Japanese energy conglomerate ENEOS Holdings said on Monday it will withdraw from a gas project in coup-hit Myanmar, days after its Thai and Malaysian partners announced they would pull out. ENEOS is the latest energy giant to retreat from the Southeast Asian country, whose military has waged a widespread crackdown on dissent since it ousted and detained civilian leader Aung San Suu Kyi last year. For the latest headlines, follow our Google News channel online or via the app. The company is involved in the Yetagun project off southern Myanmar along with the Japanese government and Mitsubishi Corporation. Together they hold a 19.3 percent stake in the gas field, which has been operational for two decades. ENEOS said it had “decided to withdraw after discussions taking into consideration the country’s current situation, including the social issues, and project economics based on the technical evaluation of Yetagun gas fields.” “This withdrawal will be effective after approval from the Myanmar government,” it added in a statement. An official at Japan’s natural resources and energy agency told AFP that the government “takes the same position” as ENEOS, noting the Yetagun project has experienced a reduction in output over the past decade. Malaysia’s Petronas and Thailand’s oil and gas conglomerate PTTEP also announced their withdrawal on Friday. Petronas subsidiary Carigali holds a roughly 41 percent stake in the Yetagun project, while PTTEP owns 19.3 percent. More than 1,800 civilians have died in Myanmar during the military crackdown and more than 13,000 have been arrested, according to a local monitoring group. With the economy tanking and pressure mounting from rights groups, companies from France’s TotalEnergies to British American Tobacco and Norway’s Telenor have upped sticks. Tokyo is a major provider of economic assistance to Myanmar, and the government has long-standing relations with the country’s military. After the coup, Japan announced it would halt all new aid, though it stopped short of imposing individual sanctions on military and police commanders.
No gas for new city distributors to start
Over a dozen new city gas distribution companies are waiting to start operations, but there is no allocation of domestic natural gas to their kitty, said executives from these companies. New city gas distribution (CGD) companies, specifically the ones who won bidding rounds-IX, X and XI, include Adani Total Gas, Torrent Gas, Indian Oil-Adani Gas, Gail Gas, Indraprastha Gas, Unison Enviro Pvt Ltd, AG&P and Think Gas. “There is no gas available for us. Last month all companies met the petroleum secretary, requesting for an increase in gas allocation to the CGD sector but to no avail. It will not be financially viable for us to buy gas in the spot market,” said an executive. As per the Gas Utilisation Policy, domestic gas is first allocated to the priority sector such as the CGD sector, then the fertiliser, power and LPG sector. Any demand over and above domestic gas may be met through imported R-LNG (regasified liquefied natural gas). The ministry reviews domestic gas allocations every six months based on actual consumption during the previous half year. However, due to the Covid-19 lockdowns, gas consumption remained low. Thus, since last April, there has been no fresh allocation. Demand, however, has picked up since the economy opened up. “Since April last year, there has been no fresh allocation of domestic gas to the sector. So, this impacts not just the new ones but the existing ones too as they are sourcing LNG for their operations,” said Prashant Vasisht, vice president and co-group head at ratings firm ICRA. Vasisht said the best solution to this is probably to tie up for the long term and midterm. “So, my guess is that players will wait and watch and slow down their capex, till there is more clarity on additional gas allocation by the government,” he said. The CGD sector is allocated 17 million metric standard cubic metres per day (mmscmd) of domestic gas which is used up by existing players including Indraprastha Gas Adani-Total Gas; Mahanagar Gas GSPC-owned Gujarat Gas and GAIL Gas. The sector needs more than 23 mmscmd of gas to meet its demand. Currently, due to the reduced allocation of domestic natural gas, coupled with a 110% hike in domestic gas price from April 1, CGD companies are blending RLNG with domestic gas to meet their needs. The companies have also increased CNG and PNG prices over the past few months.
Sri Lanka extends credit line with India by $200 mn for fuel: Power Min
Sri Lanka has extended a credit line with India by $200 million in order to procure emergency fuel stocks, the country’s power and energy minister said on Monday, with four shipments due to arrive in May. Colombo was also in talks with New Delhi over extending the credit line by an additional $500 million, minister Kanchana Wijesekera told a news conference. Hit hard by the pandemic and short of revenue after Gotabaya Rajapaksa’s government imposed steep tax cuts, the island nation is now also critically short of foreign exchange and has approached the International Monetary Fund for an emergency bailout. Rampant inflation and shortages of imported food, fuel and medicines has led to weeks of sporadically violent protests. Sri Lanka has used $400 million, on multiple shipments in April, of the $500 million credit line extended by India earlier this year, Wijesekera said. Two fuelshipments will be paid for from the remaining funds in May. “The Indian credit line was extended by $200 million recently and this will be utilised for four shipments in May. Talks are continuing for a further $500 million with India so in total the credit line will be $1.2 billion,” Wijesekera said. However, Sri Lanka is still facing payment challenges for fuel imports with the state-run Ceylon Petroleum Corporation (CPC) owing $235 million for shipments already received, while about $500 million more will be needed to pay for letters of credit maturing over the next six weeks, he added. Sri Lanka will also need dollars to pay for crude oil shipments to supplement imports from India. “We have made procurement plans till June but we still need to resolve how to find sufficient amounts of foreign exchange to make payments,” Wijesekera said.
Soaring pump prices weigh on growth in India retail fuel sales
The three biggest retailers in April sold just 0.3% more diesel than in March and 2.1% more gasoline, according to refinery officials with knowledge of the matter. That’s the slowest growth rate since sales rebounded in February following the easing of coronavirus rules that boosted activity at the nation’s factories and service providers. The slowdown is mainly because of a surge in pump prices toward the end of March that coincided with higher food prices to dent disposable incomes and consumption. Prices for diesel and gasoline, which together account for more than half of all petroleum products consumed, have risen more than 10% in New Delhi since March 22. Sales of liquefied petroleum gas, a cooking fuel that had seen fairly stable sales through the pandemic, fell 9% in April in the first decline since November. That follows a 5.6% price increase in late March, the first in more than six months.
The U.S. Shale Patch Is Facing A Plethora Of Problems
here is a fairly blithe assumption in government circles that shale production can be raised at will. That assumption is about to be put to the test as the American shale drilling and fracking industry attempts to respond to the entreaties and outright demands of legislators, members of the administrative branch’s leadership, and even the president himself to put more capital toward increasing production. This is happening, but at a level and rate that will be insufficient to boost production significantly. In fact, data from the most recent publication of the Energy Information Agency’s Drilling Productivity Report-DPR indicates trouble could lie ahead. As the graph taken from EIA-DPR data reveals, the rig count is going steadily higher, but production from the eight major shale basins has leveled off and, as of Feb, 22, has actually slightly declined. If the May edition of the DPR confirms this trend then there is going to have to be a drastic reevaluation of what will be expected from shale in the future. Shale One obvious cause of the decline is not directly related to the rig count, but in the decline of Drilled but Uncompleted-DUCs, wells being turned to production. Over the last couple of years, operators have cut the DUC inventory from ~8,500 to ~4,200. A year ago in an Oilprice article, I predicted this point would come. It has now arrived as operators have drastically curtailed the DUC withdrawal that was maintaining and increasing production over the past couple of years. There are multiple reasons for this situation and the primary ones will be discussed in the remainder of this article. Forecasting the rig count Physicist Niels Bohr once commented, “That prediction is difficult, especially about the future.” Anyone who has put a sales forecast together can relate to this wry witticism. Recently I attended an industry conference, The American Association of Drilling Engineers-AADE, where the Keynote speaker- Richard Spears, an industry analyst, and consultant, spoke about a key difficulty in forecasting in regard to estimating the likely year-end rig count. His point was that events occur and make prior forecasts seem ridiculous. His case in point was the invasion of Ukraine, which was on no one’s radar…until it happened, and immediately made every forecast up to that point out of date. Almost ludicrously so. He then took a poll of the room as to where we thought the land rig count would end up for 2022. He threw out numbers starting with 800, about a hundred higher than where we are now, and we responded when he hit the number that matched our personal belief. Virtually every hand rose with 800, about half dropped at 900, half again at 1,000, and just a few at 1,100. One or two hands stayed up at 1,200 and he stopped there. He then gave us his number, 800. This surprised me as I was one of the 1,100 hands. His justification for that number didn’t surprise me, as it involved capital restraint, lack of financing, and logistics impacts that are causing inflation in the oilfield. All things I have discussed in prior Oilprice articles. An article in the Wall Street Journal put a personal spin on this situation, as they quoted a small independent driller’s frustration with being able to secure needed materials. “If somebody walked in and put a pile of money on the table and said, ‘Drill me a well next week,’ it isn’t going to happen,” said Jamie Small, president of private-equity-backed oil producer Element Petroleum III. “You just can’t get the stuff to do it.” Take this operator’s frustration and multiply it by dozens of other small-time independent oil operators that drill about half the wells drilled annually, and you can see serious problems are brewing. Capital restraint Oil companies revised their playbook after nearly going bankrupt post-March of 2020. As oil prices rose, these companies moved their capital allocation from growth to maintenance capex, which freed up huge sums for paring down debt, rewarding long-suffering stockholders with dividends, and buying back their stock – which was at ridiculous lows following the pandemic. This is all pretty well known by now. What isn’t so well understood, is that despite some very public comments from the big players, ExxonMobil, (NYSE:XOM), and Chevron, (NYSE:CVX) to bump up production sharply, most companies are sticking closely to previously announced capex budgets. That could have profound implications for estimates of future production. Access to financing The big institution’s repugnance for oil and gas investing is well known, at least as regards the big players operating the leases. What I hadn’t realized is how severely service companies are affected by this mindset. Note this quote from the Schlumberger, (NYSE:SLB) press release- “First-quarter cash from operations was $131 million, including a first-quarter build-up of working capital above the usual level, ahead of the anticipated growth for the year. We expect free cash flow generation to accelerate throughout the year, consistent with our historical trend, and still expect double-digit free cash flow margin on a full-year basis.” SLB public filings In Q-1 they burned half a billion in cash, likely supporting working capital builds for current project mobilization. SLB SLB public filings SLB isn’t alone. Halliburton, (NYSE:HAL) burned nearly a billion in cash in Q-1, likely for the same reasons as their larger rival. HAL Halliburton public filings If the big players like HAL and SLB are shut out of traditional financing, you can imagine the difficulty lower tier or private companies are having. A final point here that Spears made is that service costs are still below the cost of replacement, and that is going to have to change in a hurry. He commented that based on his research talking to drilling contractors day rates for high spec rigs will be about $40K/per day at the end of 2022. Roughly twice current levels. Other service companies will be doing the same. One of the points he made here is that oil companies may have to become
Ukraine war: Who is buying Russian crude oil and who has stopped
Here is the response by countries regarding purchases of Russian oil since the war in Ukraine started on Feb. 24 and how companies have acted. Countries’ responses Australia, Britain, Canada and the United States have imposed outright bans on Russian oil purchases but the 27 members of the European Union have not been able to agree on the embargo. The bloc is leaning toward a ban on imports of Russian oil by the end of the year as part of a sixth package of sanctions against Russia. Germany, the EU’s largest economy, said it would be able to weather an EU embargo on Russian oil imports by the end of this year even though a stoppage could result in shortages. Hungary said it still opposed any European Union embargo on Russian oil and gas imports. Many refiners in Europe, however, have stopped buying Russian crude voluntarily, or promised to do so when their long-term contracts expire. Major global trading houses are also planning to reduce Russian crude and fuel purchases from May 15. As a result, Russian diesel exports from the Baltic port of Primorsk, a key supply source for Europe, were set to drop by more than 30% in May. China and India, which have refused to condemn Russia’s actions, continue to buy Russian crude. Current buyers Bharat Petroleum Indian state-run refiner Bharat Petroleum Corp Ltd has bought 2 million barrels of Russian Urals for May loading from trader Trafigura, two people familiar with the purchase said. The company regularly buys Russian Urals for its 310,000 barrels per day (bpd) Kochi refinery in southern India. Hindustan Petroleum India’s state refiner bought 2 million barrels of Russian Urals for May loading, according to trading sources last week. Indian Oil Corp India’s top refiner has bought 6 million barrels of Urals since Feb. 24 and has a supply contract with Rosneft for up to 15 million barrels of Russian crude in 2022. However, the refiner, which also buys crude on behalf of its Chennai Petroleum subsidiary, has excluded several high-sulphur crude grades, including Urals, from its latest tender, according to trading sources. ISAB Italy’s largest refinery, owned by Lukoil-controlled Swiss-based Litasco SA, has been forced to source nearly all of its crude oil from its Russian owner because international banks are no longer providing it with credit. The Italian government is considering temporary nationalisation of ISAB as one of its options if sanctions are imposed on Russian oil, two government sources told Reuters. Mangalore Refinery and Petrochemicals The state-run Indian refiner has bought 1 million barrels of Russian Urals crude for May loading via a tender from a European trader, a rare purchase driven by the discount offered Nayara Energy The Indian private refiner, part-owned by Rosneft, has purchased Russian oil after a gap of a year, buying about 1.8 million barrels of Urals from Trafigura
9,380 PNG connections provided till March 31
As many as 9,380 domestic connections of petroleum natural gas (PNG) have been provided, and 63 compressed natural gas (CNG) stations have been commissioned in the state till March 31, as per the latest figures of the industries department. Though PNG domestic connections have been provided only in three districts out of the targeted 11 districts, yet CNG stations have been opened in almost all the 11 districts except in Kasaragod. The highest number of PNG connections have been provided in Ernakulam (8,864), followed by Alappuzha (391) and Thiruvananthapuram (125). However, the targets set for March for other districts have not materialised yet. As per the set target for March, Kannur was supposed to be provided with 2,000 connections, Kasaragod and Palakkad with 1,000 connections each, as many as 1,200 connections in Alappuzha, and 250 connections in Thiruvananthapuram. As part of the city gas distribution network’s development in the state, the petroleum and natural gas regulatory board (PNGRB) had awarded the work of the project to M/s Atlantic Gulf and Pacific for the distribution of natural gas in Thiruvananthapuram, Kollam and Alappuzha districts, which are not covered by GAIL pipeline. In Ernakulam,Thrissur, Palakkad, Kozhikode, Wayanad, Malappuram, Kannur and Kasaragod, the task has been handed over to M/s Indian Oil-Adani Gas Private Limited. Chief minister Pinarayi Vijayan had last year announced in the Assembly that as many as 615 compressed natural gas (CNG) filling stations are expected to be operational across the state by 2026. The Kochi-Koottanad-Bengaluru-Manguluru GAIL pipeline project was completed in two phases in the state. While in the first phase, a 48km pipeline was completed, in the second phase of the project, a 450km pipeline was completed. The chief minister said that the completion of the GAIL project has provided a fillip to the industrial development of the state and would bring down expenditure on fuel substantially.
Tarun Kapoor, former petroleum secretary, appointed advisor to PM Modi
Former petroleum secretary Tarun Kapoorhas been appointed as an advisor to Prime Minister Narendra Modi, according to a government order issued on Monday. Kapoor, a 1987-batch IAS officer of the Himachal Pradesh cadre, superannuated as the secretary of the ministry of petroleum and natural gas on November 30, 2021. he Appointments Committee of the Cabinet has approved appointment of Kapoor, as an advisor to the Prime Minister, in the Prime Minister’s Office (PMO), in the rank and scale of Secretary to Government of India, initially for a period of two years from the date of joining,” the personnel ministry order said. Senior bureaucrats Hari Ranjan Rao and Atish Chandra have been appointed as additional secretaries in the Prime Minister’s Office (PMO). Rao is a 1994-batch lAS officer of the Madhya Pradesh cadre and is currently an administrator at Universal Services Obligation Fund in the department of telecommunications. Chandra, Rao’s batchmate from the Bihar cadre, is currently chairman and managing director (CMD), Food Corporation of India, department of food and public distribution.
India Negotiating With Russia To Buy 20 Million Barrels Of Discounted Oil And Enter Russian Markets Exited By The EU
India and Russia are engaged in talks over alternative payment mechanisms as both sides are negotiating for about 20 million barrels of crude from Rosneft at heavily discounted prices. The demand for energy in India is acute and increases during the summer months due to the heat and the need for cooling devices. Energy consumption grew 8.9% in March over February this year and reached an all-time record of 199.58GW on April 8. Those usage records can be expected to be constantly revised upwards. India has discounted European issues over Ukraine, increasingly seeing it as a European problem not of India’s making. India’s Ministry of Energy has consistently stated that its objective is to stabilise its economic engagement with Russia even as there is a possibility that the Western sanctions against Russia could impact India. Ministry spokesperson Arindam Bagchi has said. “Our objective has been to see how we can stabilise the economic transactions or economic engagement that we are doing with Russia in the current context. There is a possibility that these sanctions might impact us and that is why we are having inter-ministerial discussions and other conversations to see how we can keep our economic interactions with Russia stabilised and to see how we can ensure our own interests are not affected.” Western demands for Asian action against Russia are proving problematic as the situation was not created by Asian nations, and their energy strategies have long included Russia. India for example imports gas from Russian fields in the Arctic. Due to Russia’s continuing energy trade with the US and EU, Rosneft has several non-sanctioned intermediaries and trading companies which are in legitimate, non-sanctioned supply talks with Indian companies. India has also shown interest in potential for shipbuilding activities in Vladivostok and Gujarat in Western India for design and building of the next generation of oil and gas tankers. Prime Minister Modi was the chief minister of Gujarat from 2001 to 2014, with the area having shipbuilding yards with an eye on not just Arctic capable shipping but also to service the International North-South Transportation Corridor (INSTC) requirements. The INSTC is a Suez Canal alternative route running maritime from Mumbai to Iran then multimodal north through Iran and onto Caspian Sea Ports to both Central Asia, the Caucasus and Europe. This ‘Southern’ route is likely to prove popular as it allows goods transit from the EU to Asia without the need to transit via Russia. India has also established the Vladivostok-Chennai maritime corridor with extensions through to Mumbai with India and Russia collaborating on Indian Ocean transportation routes to supply India and Southeast Asia with LNG supplies from the Yamal fields in the Russian arctic – along the Northern Sea Passage. India has also shown interest in sourcing organic fertilizers from Russia, an interesting development in view of the fact that New Delhi has stated its intention for India to develop as a major grain and wheat exporter given disruptions to the global supply chain created by the Ukraine conflict – both Russia and Ukraine are major wheat suppliers. India is rolling out measures during 2022 to try and take advantage include ensuring that government approved laboratories adequately test the export quality, making additional rail wagons available, and working with port authorities to give priority to wheat exports. India has an advantage of surplus stocks at home and a sharp rise in global prices. So far, the organisation appears to be on track. Indian wheat exports picked up in 2021 to reach 6.12 million tonnes, up from just 1.12 million tonnes the previous year. A 2022 target is believed to be the export of 10 million tonnes of wheat after the new season harvest in June/July. India’s strategy as concerns preserving its energy credibility includes, along with other Asian nations such as China, the purchase of Russian crude oil at heavily discounted prices from Russian SOE Rosneft, which also operates India’s second largest refinery. India is also keen to fill the vacuum in the merchandise sector after the withdrawal of European companies from the Russian market and is looking to boost trade by an annual US$2 billion per annum. Delhi is negotiating a Free Trade Agreement with the Eurasian Economic Union and this can be expected to progress further once the Ukraine situation is resolved.