Asian LNG prices fall to near three-year low as buyers shun spot cargoes: traders
The spot prices for LNG cargoes to be delivered into Northeast Asia in May fell this week to a nearly three-year low of $4.30 per million British thermal units (mmBtu), according to several trade sources. The spot price for Northeast Asia LNG was last assessed at $4.65 per mmBtu on March 21, Refinitiv Eikon data showed. The price quoted by the trade sources on Wednesday is the lowest since the week of April 15, 2016, when Refinitiv data showed it at $4, the lowest ever for data going back to 2010. Gas inventories in Asia are high and buyers are shunning cargoes and re-directing them to Europe, the sources said. “It’s tank top situation in many places and inventories are high,” a Singapore-based LNG trader said, speaking on condition of anonymity. “There’s really no or minimal demand… it’s an oversupplied market.” Many companies were offering cargoes which were also weighing on spot prices, the traders said. Several Chinese companies were reselling cargoes they did not need while at least one Indian company had diverted a cargo to Europe, two traders said. With Chinese companies having signed up mid- to long-term contracts last year to receive LNG in anticipation of a big pick up in demand during winter which never happened due to mild weather, supply into the country was ample, a Chinese LNG trader said. “It’s not about price but about demand and the capacity in China. We cannot receive more cargoes and right now many sellers are trying to sell cargoes into west,” he said. LNG import volumes into Northeast Asia in March are set to rise by 3 percent from February while imports of the super-chilled fuel into North West Europe are set to jump by 70 percent to a record high in March, Refinitiv data showed. The Japan Korea Marker, the benchmark for Asian spot LNG cargoes, has fallen below the Title Transfer Facility price in the Netherlands, an European benchmark which is currently at about $4.80 per mmBtu, the traders said. That is encouraging the diversion of cargoes from Asia to Europe, they said. While Indian buyers were taking advantage of lower spot prices to buy cargoes, limited import capacity will curb their purchase volumes, a trader familiar with the market said. Globally, LNG supply is expected to grow by an estimated record 40 million tonnes, or 13 percent, this year, potentially putting further pressure on Asian LNG prices.
GAIL sells US LNG cargo to Europe amid high stocks in India
Full storage tanks of liquified natural gas (LNG) in India have prompted GAIL India to sell a U.S. cargo bound for the Asia nation to northwest Europe, industry sources said on Wednesday. The sale of a cargo already on the water is the latest example of an oversupplied LNG market that has resulted in Asian spot LNG prices falling to an almost three-year low of around $4.30 per million British thermal units (mmBtu) this week. It also signals that India’s LNG demand, considered substantial compared to northeast Asia, is weaker than expected. Europe has become a top destination this year for cargoes that cannot find a home in Asia because of high stock levels and low delivery prices. The cargo on board of the Meridian Spirit that loaded at the U.S. Cove Point plant on March 20 was offered in a tender on March 25 when it was crossing the Atlantic Ocean. It was sold at about $4.30 per mmBtu, three industry sources said. The cargo will be delivered to Belgium’s Zeebrugge terminal, one of them added. The vessel turned to northwest Europe on March 26 when the tender was closed, Refinitiv Eikon data showed. There is a tank top situation at India’s west coast terminals, meaning the storage facilities were full, the industry source said, adding this had led to the cargo being sold to a European destination. Prices in India are at a slight discount to those in northeast Asia. But sources said that, even if the prices were going down further, it did not mean that India would be able to buy significantly more LNG. GAIL has 20-year deals to buy 5.8 million tonnes a year of U.S. LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site. The Meridian Spirit is expected to be used by GAIL to load a new cargo in the U.S. Gulf in mid-May. There are at least two tenders from other India’s companies, trade sources said. Indian Oil Corp (IOC) is looking to buy a mid-May delivery cargo. Petronet is looking for three cargoes for delivery between July and December. Regasification capacity has constrained LNG imports in India in recent years. India has four terminals receiving LNG on the West coast. India’s first East coast terminal Ennore was commissioned by IOC this month. Two more terminals, GSPC’s Mundra and H Energ’s Jaigarh, are expected to start up this year.
India records lowest crude oil production in nine years
India produced 31,349 Thousand Tonne (TMT) of crude oil in the first eleven months (April-February) of the current financial year (2018-2019), the lowest output recorded in the past nine years during the same period, according to fresh data sourced from the oil ministry. The declining trend in the country’s domestic crude oil production is coming at a time when the country’s oil import bill has already ballooned 29 per cent to $102.9 billion during the April-February period of the current fiscal. Also, the decline in domestic crude oil production has pushed India’s oil import dependence to 83.8 per cent, the highest recorded in the April-February period in the last five years for which data is publicly available. The government had earlier said it is working towards a plan to reduce the country’s crude oil import dependence by 10 per cent by 2022. India’s crude oil production in February 2019 declined 6.4 per cent to 2,564 TMT, as compared to 2,731 TMT produced in the corresponding month a year ago, primarily due to fall in production from fields operated by Oil and Natural Gas Corporation (ONGC), private players and fields operated under a Joint Venture, data showed.Cumulatively India’s crude oil production in April-February period declined 4 per cent to 31,349 TMT, as compared to 32,643 TMT recorded in the corresponding period a year ago. India’s oil production has declined over the past nine years mainly due to ageing fields leading to fall in output from nearly all the offshore and onshore blocks, data shows. ONGC ONGC’s crude oil production during February 2019 declined 5 per cent to 1,599 TMT mainly due to decreased production from Western Offshore fields. Cumulatively, the firm’s oil production during the first 11 months of the current fiscal dropped 5.38 per cent to 19,274 TMT. According to the the oil ministry, the reasons for reduced output include problems in Electric Submersible Pump (ESP) in some wells of NBP fields, loss of production from WO-16 fields due to absence of Mobile Offshore Production Unit, sub-sea leakage in some well fluid lines of Mumbai High and Neelam Heera asset. Oil India Oil India’ crude oil production during February 2019 declined 6.45 per cent to 244 TMT mainly due to fall in production from Assam fields. Cumulatively, the company’s oil output during the April-February period declined 3 per cent to 3,015 TMT. The reduced output was due to less than planned contribution from work-over wells and drilling wells and loss of production caused due to strikes and miscreant activities in operational areas. Pvt/ Joint Venture fields Oil production by private operators and JVs dropped 8.30 per cent to 721 TMT in February due to decline in Rajasthan fields as well as offshore fields. Cumulatively, oil production by private and JV operators during the April-February period slumped 1.29 per cent to 9,060 TMT. The decline is attributed to loss of production from Mangala due to delay in upgrade of Mangala Process Terminal (MPT) and delay in drilling, completion and hooking up online 45 wells, along with closure of around 98 oil wells at Cairn Oil and Gas’ assets due to various reasons like liquid handling constraint at MPT plant, pump failure, surface facility limitation.
UK’s National Grid forecasts Summer 2019 gas demand at 36.1 bcm
Britain’s National Grid forecast gas demand during the summer period will total 36.1 billion cubic metres, it said in its annual Summer Outlook on Tuesday. The figure is almost 6 percent higher than summer gas demand in 2018, once weather related adjustments were made, the report said. Electrcity demand is expected to peak at 33.7 gigawatts (GW) while the minimum summer electricity demand is forecast at 17.9 GW.
All state-run oil companies exceed capex target
Indian Oil, Hindustan Petroleum, Bharat Petroleum, and GAIL have exceeded their capital expenditure targets for the current fiscal, having spent heavily on refinery upgrades, pipelines, and marketing infrastructure. The combined capex target set for all staterun oil producers, refiners and marketers for 2018-19 is Rs 89,335 crore, of which they have collectively spent Rs 82,711 crore, or about 93%, in the 11 months through February. Explorer Oil and Natural Gas Corp, which typically has much higher spending budget every year than the refiners, has spent about 80% of its annual target of Rs 32,000 crore. Its overseas arm, ONGC Videsh, has used up about 85% of its Rs 5,890 crore target, while another state-run producer, Oil India, has spent 78% of its target of Rs 4,300 crore. Gas marketer GAIL and refiners Indian Oil, HPCL and BPCL have surpassed their annual target in 11months. BPCL has spent Rs 8,993 crore, or 121% of its target. GAIL, which is investing heavily in laying a gas pipeline in eastern India, had spent Rs 5,059 crore until February, or 107% of its target for the year. HPCL has already used up Rs 8,938 crore, or 106% of its annual outlay. Indian Oil, the nation’s largest refiner and fossil fuel retailer, has invested Rs 23,492 crore, or 103% of its target. Refiners have been upgrading their facilities to produce lower-emission fuels that will help curb intense air pollution in cities. They have also been spending on setting up new pipelines, depots and retail outlets. Indian oil companies have been investing heavily in finding, refining and distributing oil and gas across the country for the last many years to meet mounting demand for fuel and feedstock. Meanwhile, economic expansion has pushed up oil demand by 3.2% during April-Feb of 2018-19. India is also hoping to increase its domestic oil output and reduce its dependence on import by making massive investments in exploration and production. Domestic crude oil output has been declining for years. India imports about 80% of the oil and about half of the natural gas it consumes. The import bill of crude oil is estimated to expand 27% from $88 billion in 2017-18 to $112 billion in 2018-19.
Oil companies have more expertise than GAIL in operating city gas business: Fitch
India’s state-owned oil marketing companies (OMCs) will have more expertise than GAIL in operating the retail-oriented business model required under the city-gas distribution (CGD) rights but GAIL would benefit more from the rising transmission volumes, said research and ratings agency Fitch Ratings. In a report on the recent award of city-gas distribution rights in India to state-owned OMCs, the firm said that the initiative would help them diversify from their oil refining and marketing business and maintain their strong market shares in the domestic cooking and auto fuel markets over the long-term. The government had last month awarded Indian Oil (IOC) and Hindustan Petroleum (HPCL) CGD rights to nine geographical areas (GAs) each and Bharat Petroleum Corp (BPCL) rights to two areas. BPCL had won the rights to 11 GAs in a previous auction in September 2018. The investment by the winners of each GA will depend on its physical size, as well as the number of natural gas stations for automobiles that must be built and length of PNG steel pipeline that must be laid under the terms of the distribution rights. “In any case, we expect the investments in city-gas distribution to remain relatively small over the medium-term relative to the overall investment plans of the state-owned oil marketing companies,” the report said. Other companies which had won the bids in the auction of rights for 50 GAs included state-owned gas processing and distribution company GAIL India, state-owned Maharashtra Natural Gas and Rajasthan State Gas apart from private companies Adani Gas and Torrent Gas. The expansion in gas distribution networks is likely to increase gas consumption over the medium to long term while industrial demand is likely to remain highly sensitive to prices. Natural gas consumption increased by around 3 per cent in April 2018-January 2019 period and 4.5 per cent last financial year (2017-18).
Brazil oil regulator announces details on October deepwater oil auction
Brazil’s oil regulator ANP on Monday announced details of the 16th-round auction of oil areas under the concession regime, stipulating a higher bonus amount for the CM-541 block in the Campos Basin, which surpasses 1 billion reais ($259 million). According to an ANP statement, the round must take place on Oct. 10, with the signing of the agreements in February 2020. There will be public consultation of the rules until April 9 and public hearing the next day in Rio de Janeiro. Registration for the tender ends on Aug. 20. The ANP added that a total of 29,300 square kilometers will be offered in the round, which will have 36 different blocks from the Campos, Jacuipe, Camamu-Almada, Pernambuco-Paraiba and Santos basins.
Saudi Aramco building global gas business to cut carbon footprint
Saudi Aramco, the world’s biggest oil producer, was building an international gas business and converting more crude oil into chemicals in a bid to lessen its carbon footprint, Chief Executive Amin Nasser said on Tuesday. Aramco is building “an energy bridge” between Saudi Arabia and China to meet the Asian energy consumer’s increasing need for oil and gas as well as for chemicals and liquefied natural gas (LNG), according to a copy of Nasser’s speech at an industry event in Beijing. “We need to help our stakeholders – including here in China and the wider Asia region – realise that oil and gas will remain vital to world energy for decades to come,” he said. “We need to reassure them with our own long-term investments that the safety belt we have always provided is one they can continue to rely on.” Aramco’s gas expansion strategy needs $150 billion of investment over the next decade as the company plans to increase output and later become a gas exporter, Nasser had said in November. The state-owned company is pushing ahead with its conventional and unconventional gas exploration and production program to feed its fast-growing industries, freeing up more crude oil to export or turn into chemicals. Nasser said that the carbon footprint of Saudi oil is among the lowest in the world, and has the lowest greenhouse gas intensity of any supplier of crude oil to China. Aramco is a major investor in China’s energy sector. In February, Aramco inked a deal with Chinese defence conglomerate Norinco to develop a $10 billion refining and petrochemical complex and another agreement to buy a stake in Zhejiang Petrochemical. Saudi Arabia was China’s biggest crude oil supplier in February, data from the general administration of Chinese customs showed on Monday, reclaiming the crown from Russia after ranking no. 2 in January.
Regulator drops plan to force LNG terminals to reserve share for common use
The downstream regulator has scrapped its plan to force LNG terminals to reserve a share of their capacity for common use after industry opposed the move arguing the proposal was premature and would hurt local gas demand. In March 2018, the Petroleum and Natural Gas Regulatory Board (PNGRB) had published a draft regulation for LNG terminals in the country, requiring them to register with the board, follow certain safety standards and, most contentiously, offer some common carrier capacity. The draft mandated an LNG terminal to “offer at all times, after registration, 20 per cent of its short term (less than five years contract) uncommitted regasification capacity or 0.5 million metric tonnes per annum (MMTPA), whichever is higher, as common carrier capacity.” Uncommitted capacity means the part which is net of the entity’s own and contractual requirement. “We will bring regulation only to the extent of registration and safety,” PNGRB chairman DK Sarraf told ET, adding the proposal on common carrier capacity has been dropped. “We would like to support LNG terminals by keeping them away from regulatory burdens until they are fully established and their capacity utilisation goes beyond a level where some regulation becomes necessary to protect consumer interest,” he said. Regulator drops plan to force LNG terminals to reserve share for common use The draft provoked strong reaction from industry players, who felt proposed rules could upset the economics of LNG terminals as they may have to make additional investment for the capacity that will have to be reserved for common use. This would mean either longer payback period or higher toll for customers that could hurt demand for gas. “Industry told us that they respected the consumer protection intent of the regulator but it was unnecessary at this point in time,” Sarraf said. “They said so many new terminals were coming up that there will be a lot of capacity in the country, and utilisation will be low for a long time. Therefore, capacity will anyway be available to every customer. But a new regulation will place unnecessary financial burden on LNG terminals, they said.” India has added about 10 million tonnes a year LNG regasification capacity in the past six months to about 37 million tonnes now. This is expected to rise to 50 million tonnes a year by 2022. The capacity explosion and the government’s aim to push up gas usage in India’s primary energy mix to 15 per cent from 6 per cent had triggered temptation to regulate LNG terminals.
UAE’s ADNOC awards onshore exploration block to Indian consortium
Abu Dhabi National Oil Company (ADNO) said on Monday it had signed an agreement with an Indian consortium awarding the latter the exploration rights for an onshore block. Two Indian companies – Bharat Petroleum Corp Ltd and Indian Oil Corp – will together hold a 100 percent stake in the exploration phase for Onshore Block 1, ADNOC said in a statement. The Indian firms will invest up to 626 million dirhams ($170 million), including a participation fee, to explore and appraise oil and gas in the block. If successful, the consortium will be able to develop and produce any discoveries with an option for ADNOC to hold a 60 percent stake in the production phase. The agreements, which have a term of 35 years, conclude Abu Dhabi’s first-ever competitive block bid round, ADNOC said. “The onshore exploration block awarded to the Indian consortium will target, specifically, the conventional oil and gas opportunities in the area,” ADNOC said. The Onshore Block 1 area also covers the separate Ruwais Diyab Unconventional Gas Concession, where France’s Total has the exploration rights for tight gas in the Diyab formation. ADNOC has awarded Offshore Blocks 1 and 2 to Italy’s ENI and Thailand’s PTT Exploration and Production Pcl ; Onshore Block 3 to U.S.-based Occidental Petroleum; and Onshore Block 4 to Japan’s Inpex Corp.