Vedanta, ONGC, Oil India submit bids for discovered small field auctions
As many as 26 companies have submitted 106 bids in the third round of discovered small field (DSF) auctions for which the last date of submission of bids was May 31. The list of companies includes Oil and Natural Gas Corporation (ONGC), Oil India (OIL) and Anil Agarwal-led Vedanta Ltd, among others. The current round of DSF was launched for 32 contract areas, spread across nine sedimentary basins, covering an area of more than 13,000 square kilometres. Out of the 32 contract areas, 11 are onland, 18 are in shallow water and one is in deep-water. Vedanta has submitted 31 bids, while ONGC has around 13 bids during the current round. Other companies in the list of bidders include Invenire Energy, Sun Petrochemicals, Megha Engineering and Infrastructures, Oilmax Energy, Ganges Geo Resources, Joshi Technologies and Duganta Oil and Natural Gas. Out of the 26 companies – four were public sector undertakings and 22 private sector players. “This demonstrates the interest of public and private players in the Indian exploration and production sector. This time, blocks were awarded in clusters and hence it received so much interest,” said a source aware about the development. E-bids were received against all contract areas on offer. Out of the total 32 areas, 24 of them got multiple bids taking it to a total of 98 e-bids, while only eight of them got single bids. The government had announced DSF Policy in October 2015 and till now two rounds of DSF have been concluded for 54 Contract Areas. As many as 27 companies, including 12 new entrants had participated in the first two rounds of DSF. The current round of DSF is expected to have an in-place hydrocarbons of around 230 million metric tonne. According to the government, the salient features of DSF policy are revenue sharing model, single license for conventional and unconventional hydrocarbons, no upfront signature bonus, reduced royalty rate in line with HELP (Hydrocarbon Exploration and Licensing Policy), no cess, full marketing and pricing freedom for gas produced, exploration allowed during entire contract period, and 100 per cent participation from foreign companies and joint ventures. In the DSF Round – I launched in 2016, 134 bids were submitted for 34 contract areas by 47 companies. 30 Revenue Sharing Contracts were signed. In DSF Round – II launched in 2018, 145 bids were submitted for 24 contract areas. 24 Revenue Sharing Contracts were signed. The first round saw as many as 22 companies winning bids for 31 contract areas. The gross revenue from the first round was expected to be around Rs Rs 464 billion. The government’s share was expected to be around Rs 140 billion. However, production is yet to start from any of these blocks, majorly because of economic slowdown and the pandemic. During the second round in February 2019, a total of eight companies won 23 contract areas. The second round was also expected to start production during the current year.
Centre puts oil pipeline monetisation on hold as PSUs resist: Report
Convincing the petroleum ministry by stating the plan as an expensive way to raise capital, state gas utility GAIL, Hindustan Petroleum, and Indian Oil Corporation may not go ahead with pipeline monetisation, a media report said on Wednesday. According to the Economic Times report, the government expected the companies to transfer some of their pipelines to separate infrastructure investment trusts (InvITs) and sell minority stakes in those to raise Rs 170 billion. The oil companies have told the government that their high credit ratings, among the best in the country, will allow them to raise capital easily and at a much lower cost than any return they would have to offer InvIT investors, the report added. The asset monetisation programme, announced in Budget 2021, is a pipeline of assets the government is looking to monetise to collect about Rs 6 trillion to partly fund its ambitious infrastructure projects over four years ending 2024-25. Finance Minister Nirmala Sitharaman while announcing the plan said it’s important that India recognises the time has come for making the most out of our assets. The plan includes petroleum product pipelines of 3,930 km to be monetised by Indian Oil Corporation, Hindustan Petroleum Corporation and the Ministry of Petroleum and Natural Gas. “The pipeline monetisation plan is no more on the table,” Economic Times quoted a person in the know. As per report, the oil and gas companies had resisted the idea from the beginning as pipelines are core to their business and the InvIT model being not so attractive for them. For the oil companies, InvIT would have been a trade-off between current and future cash flows as the stake sale would yield capital but they would start paying an operating charge for using the assets. The government now is debating whether these pipelines can be managed by a third party or shared, it added.
GLOBAL LNG: Asian prices rise on demand growth; narrowing spread with Europe
The increased competition has accordingly narrowed the spread with European gas prices on the Dutch TTF hub, where prices went down after concerns over further Russian gas cuts eased. Asian spot liquefied natural gas (LNG) prices were up this week on continued demand growth from Japan, Korea and India as large utilities sought to replenish stocks. The increased competition has accordingly narrowed the spread with European gas prices on the Dutch TTF hub, where prices went down after concerns over further Russian gas cuts eased. The average LNG price for July delivery into north-east Asia was estimated at $24.75 per metric million British thermal units (mmBtu), up $1.35 or 5.8% from the previous week, industry sources said. “The market has been a little more stable recently compared with the volatility of earlier months, although still at high prices,” said Alex Froley, LNG analyst at data intelligence firm ICIS. “It looks set to continue in this mood in the near term, with Continental European prices strongest as storage injections continue, Asia a little lower as COVID lockdowns dent Chinese demand, and the UK lower again as it has constraints on its demand due to lack of storage capacity,” he said. In China, market players are waiting to see if COVID lockdown easing will help demand. China’s LNG imports until end-May were down by 6.5 million tonnes, or 20% from the previous year, equalling some 9 billion cubic metres of pipeline gas, Froley said. In Europe, S&P Global Commodity Insights assessed LNG prices for a delivered ex-ship (DES) basis into Northwest Europe at $24.375 per mmBtu on May 31, at a discount of $4.90/mmBtu to the July price on the Dutch gas TTF hub. “Discounts to the main European gas hub continued to narrow for spot LNG cargoes as increased competition from North Asia hiked up prices for LNG cargoes into Europe,” said Ciaran Roe, global director of LNG at S&P Global Commodity insights. “Major purchases by large Korean and Japanese utilities have occurred in the meantime, while within Europe discounts remain between hubs with high regasification capacity and those that are logistically constrained in terms of LNG imports relative to their gas demand.” Russia’s Gazprom on Wednesday cut off gas supplies to Denmark’s Orsted, and to Shell Energy for its contract to supply gas to Germany, citing the companies’ failure to make payments in roubles. It has already halted supplies to Dutch gas trader GasTerra, as well as to Bulgaria, Poland and Finland. However, all these clients said they can replace the gas cuts from elsewhere. LNG freight spot rates continued to rise as vessel availability tightens, with Pacific rates estimated at $85,000 per day and the Atlantic rates at $96,500 per day, according to Spark Commodities.
A Radical Plan To Halt The Oil Price Rally
The summer driving season is here again, and U.S. motorists are feeling real pain at the pump as gas prices continue taking out fresh highs. The national average for unleaded gas hit a new high of $4.67 per gallon on Wednesday, with the average price at $4 per gallon or above in all 50 states for the first time ever. President Biden is scrambling to lower gas prices ahead of the midterm elections, but is short of options after the historic release from the Strategic Petroleum Reserve of 1 million barrels a day for six months did little to slow the oil price rally. The situation is not any better in Europe, with energy prices skyrocketing as the world contends with supply chain bottlenecks, Russia’s invasion of Ukraine, and the lingering effects of Covid-19 lockdowns. OPEC has not been of much help, either, although the Wall Street Journal has reported that some OPEC members are exploring the idea of suspending Russia’s participation, which could pave the way for Saudi Arabia, the UAE, and other OPEC producers to pump significantly more crude. But Italy’s prime minister, Mario Draghi, has hatched an even more radical plan to contain the oil price rally. The former European Central Bank president has floated the idea of creating a “cartel” of oil consumers at a meeting with Joe Biden in order to increase their bargaining power, similar to how the biggest oil-producing nations came together through OPEC to agree on annual oil production quotas. The two met at the White House on Tuesday to coordinate their positions on Russia’s invasion of Ukraine and the economic fallout from the conflict. “We are both dissatisfied with the way things work, in terms of oil for the US and in terms of gas for Europe. Prices don’t have any relationship with supply and demand,” Draghi has said. According to Brussels think tank Bruegel, since September 2021, Germany, France, Italy, and Spain–four of the largest EU economies–have each spent €20bn-€30bn to artificially lower energy prices. However, these subsidies are viewed as less than ideal since they help to fund Moscow, drain public finances and harm the environment. Oil Price Cap Draghi and Biden have also discussed implementing a cap on wholesale gas prices, an idea pushed by Italy within the EU for the past three months. Indeed, Italy has managed to get many EU states on board for an oil price cap, but is facing strong opposition from the Netherlands and Germany, two of the largest importers of Russian oil. The EU executive is also not buying it. According to the European Commission, an oil price cap should only be a last resort for an emergency, such as in the event Russia cuts off all gas to the EU. The EC’s decision appears to have been swayed by a cross-section of analysts who have argued that caps could imperil the EU’s climate goals, by encouraging more consumption of fossil fuels. Roberto Cingolani, Italy’s minister for ecological transition, is not taking the opposition lightly: “Countries that oppose [the idea] defend the concept of a free market … this free market has allowed gas prices to increase five or six-fold without there being a real physical reason, for example a shortage, which has affected the cost of electricity. Citizens are unable to bear the costs, and businesses suffer the high energy costs of manufacturing,” he has told the Guardian. But it appears European leaders are more receptive to the idea of creating a natural gas buyers’ cartel after the EU agreed in March to use the union’s considerable heft to get better gas prices. “We have important leverage. So instead of outbidding each other and driving prices up, we should pull our common weight,” the European Commission president, Ursula von der Leyen, has declared. This probably makes more sense, considering that more than 40% of EU gas and 25% of its oil came from Russia before the Ukraine invasion. On Monday, the European Union agreed on a partial ban on Russian oil imports, which immediately covers more than 2/3 of oil imports from Russia, according to European Council chief Charles Michel. That said, other plans to curb the price of crude could end up gaining traction and becoming a reality considering that some high-powered figures in Germany are open to the idea. Last week, Germany’s economy minister, Robert Habeck, revealed that the commission and the U.S. were working on a proposal to cap global oil prices. Meanwhile, Michael Bloss, a German Green MEP, has suggested that the EU should create an oil consumers’ cartel with other developed countries, including the U.S., UK, Japan, and South Korea, which represent “a huge share of oil consumption” on the global market. “If they together say this is the price we are going to pay, but not more, the sellers, they will have to abide by it … This special time needs special action.”