How India extricated itself from an energy squeeze
India experienced a combination of external pressures in 2018. These included the rise in global oil prices which pushed up retail prices of gasoline in the country by around 9pc between mid-August and early October, a weakening of the rupee, and US pressure to cut crude oil imports from Iran, which comprise around 13pc of total oil imports, ahead of the re-imposition of sanctions. India arguably emerged from these none the worse for wear. The government, facing the prospect of unhappy consumers ahead of a general election in 2019, intervened to cut excise duties by 1.5 rupees ($0.02) a litre. It also asked state refiners to reduce their margins by 1 rupee a litre. Following this, the softening of global oil prices in late 2018 almost entirely reversed the retail price increase. Although the growing demand for oil has tended to fluctuate with changes in the oil price, it is currently underpinned by economic expansion, including massive government-funded programmes of road building and extending access to petroleum products such as LPG in rural areas. This was reflected in a rebound of demand at roughly 234,000 bl/d in the year to September 2018, compared with roughly 51,000 bl/d to September 2017. The country consumes around 4.8mn bl/d, of which roughly 80pc is imported. Looking ahead to 2035, India’s demand for oil is expected to account for around one third of global growth. The 2019 general election is unlikely to alter energy policy significantly. Driven by fiscal concerns, the Modi government in 2015 set a target to reduce oil (and gas) imports by 10pc by 2022, and 50pc by 2030. And so far it remains focused on pursuing this goal. The pressures experienced in 2018 will accelerate government efforts to secure access to diverse supply sources that can meet rising energy demand while mitigating the fiscal impacts of any future potential supply disruptions. This is specifically with a view to keeping the fiscal deficit within 3.3pc of GDP. This is why, despite having reportedly secured a waiver from US sanctions on Iran, India has simultaneously ramped up efforts to attract international investment in upstream exploration. Contracts for a second round of bidding under its two flagship policies— entitled “Discovered Small Fields” and “Open Acreage Licensing”—will be signed in 2019, with a third round also planned. The country is also seeking private investments to develop the second phase of its Strategic Petroleum Reserve (SPR) for oil. When this is completed, it is expected to amount to 11.8mn tons (87mn boe) in total, and is likely to be expanded further. India’s importance as a future driver of global energy demand has also garnered interest from oil exporters looking to secure markets for their supplies, as illustrated by the $44bn investment in a 1.2mn bl/d refinery involving Saudi Aramco, Adnoc and three Indian state refiners. This fits in with plans to nearly double refining capacity in order to meet an expected increase in demand to 2030. Other global energy majors are similarly likely to enter the Indian downstream market in 2019. India has perhaps most visibly demonstrated its residual bargaining power in the gas sector, shifting its strategy over the last two years towards cultivating more flexible access to LNG imports. Successful renegotiations involving price, delivery dates and volumes in three major long-term LNG contracts with RasGas, ExxonMobil and Gazprom reflect this shift. Efforts are also likely to continue in 2019 to commercialise the use of gas more widely in the Indian economy, thus with limited success. The surge in LNG imports in India over 2015-2017, rising from roughly 20-30pc of total gas consumption to nearly 50pc, was largely driven by the industrial sector which consumed around 50pc of the total. Yet, total annual gas consumption of just over 50bn cm represents a relatively small quantity in global terms and India remains a wildcard in terms of its future contribution to global gas demand. The latter will depend on two key factors – the price competitiveness of gas in the Indian economy relative to competing fuels such as coal and naphtha, and the development of infrastructure and a clear regulatory framework. There is likely to be some progress in 2019 on both fronts. Prices for gas produced from specified under-explored “difficult” deep-water fields are linked to a weighted average of substitutes including coal and naphtha, set at $7.67mn btu for the period September 2018 to March 2019), more closely reflecting the prices of fuels that gas is meant to be replacing in the domestic economy. Plans to set up a gas trading hub in the country to aid a government target of increasing gas’s share in the energy mix to 15pc by 2030, from 6.5pc at present, is forcing authorities to look at the current regulatory framework related to competition and third-party access. They are also looking at the restructuring of state gas company GAIL into separate marketing and transportation (pipeline) businesses. Despite the role that fossil fuels are expected to continue to play in India’s future economic trajectory, the country has already embarked on an ambitious transition towards clean energy. Its leadership on renewable energy, targeting the addition of 175 gigawatts of renewable capacity by 2022, was acknowledged in a 2018 study in Nature Communications. This assessed the relationship between national ambitions to cut emissions and the temperature rise that would result if the world followed India’s example. The study showed that India’s policies put it on track to outperform its COP21 commitments, with a target only slightly off course. The expectation is that a large proportion of the 175 gigawatt target will be achieved – Wood Mackenzie for instance puts it at 76pc. India has had stellar success with its renewable auctions, with record low tariffs continuing in 2018 priced at 2.44 rupees or roughly $0.035 per kilowatt hour. The effects of this capacity expansion are beginning to show up in electricity generation. In August 2018, renewables (mainly wind) contributed a record 13.4pc to electricity generation, representing a year-on-year increase of just
Petroleum ministry asks OMCs to prepare a detailed road map for time bound implementation of PMUY
Minister of Petroleum & Natural Gas, Dharmendra Pradhan interacted with the Chairman/CMDs and Senior Management of Oil Marketing Companies (OMCs) through video conference on the Cabinet decision of the Government to expand the scope of eligible beneficiaries of Pradhan MantriUjjwalaYojana (PMUY) to include all poor families in the country to achieve the universal coverage. The Minister appreciated the efforts and proactive role of OMC officials in successfully implementing the Ujjwala scheme with full commitment and dedication. Under PMUY, 5.86 Cr connections have been released so far. Minister expressed satisfaction to the fact that 48% of the PMUY beneficiaries are SC/ ST households. He thanked the OMCs for expanding LPG coverage in India from 55% in 2014 to near 90% now. The Minister further advised OMCs to disseminate the decision to extend the benefits of PMUY to all poor families at ground level and also prepare a detailed road map for its time bound implementation. They were asked to mobilize required equipment to release connections to PMUY beneficiaries in a mission mode.
Gazprom says completes gas sales on electronic platform
Russian gas giant Gazprom said on Wednesday it has successfully completed the first “day-ahead” gas sales deal on the Electronic Sales Platform (ESP), a new sales tool. Gas sales through the ESP, designed for sales to European consumers, started at the end of September. Over the first 3 months of operations via the ESP, the company has sold more than 1.6 billion cubic metres of gas, having signed contracts with more than 20 clients, Gazprom said.
OMV joins ADNOC for Ghasha gas project in Abu Dhabi
Austrian oil and gas group OMV signed a concession agreement with Abu Dhabi National Oil Company (ADNOC) for a 5 per cent stake in the Ghasha offshore gas and condensate fields, strengthening its position in the region, it said on Wednesday. The Ghasha project consists of the three major gas and condensate development projects – Hail, Ghasha and Dalma – as well as other offshore oil, gas and condensate fields, including Nasr, SARB and Mubarraz, OMV said.
Saudi’s Min Falih discusses joint refining projects with India’s Reliance
India’s Reliance, operator of the world’s biggest refining complex, and top oil exporter Saudi Arabia will explore joint investments in refining and petrochemicals in the two countries, Saudi Arabian Energy Minister Khalid al-Falih said. Al-Falih tweeted that he met Reliance Industries chairman Mukesh Ambani and they discussed joint investment opportunities and cooperation in petrochemicals, refining and telecoms in their two countries. Reliance’s two oil refineries in western India have a combined capacity to process 1.4 million barrels per day of crude and the company has set a target to raise capacity by a further 600,000 bpd.
Oil marketing companies want to procure compressed bio gas
IOCL has launched awareness programmes on sustainable alternative towards affordable transportation initiative. State-run oil marketing companies (OMCs), Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Limited recently organised a roadshow in Pune aware on public on SATAT (sustainable alternative towards affordable transportation) initiative launched by petroleum minister Dharmendra Pradhan. As part of SATAT initiative, OMCs are inviting expression of interest to procure compressed bio gas (CBG) from potential entrepreneurs and make it available in the market for use as automotive fuel. It envisions establishment of 5,000 CBG plants pan-India with an estimated production of 15 million tons per annum by 2023. The innovative SATAT initiative is a push to boost availability of more affordable transport fuels, better use of agricultural residue, cattle dung and municipal solid waste as well as to provide an additional revenue source to farmers.
South Korea’s 2018 LNG imports to hit record high over 42 mt
South Korea’s imports of liquefied natural gas (LNG) are set to reach an all-time high over 42 million tonnes in 2018 thanks to robust power generation demand, but next year’s shipments are likely to ebb on increased coal and nuclear power. South Korea, the world’s No.3 LNG importer after Japan and China, typically takes between 33 million and 37 million tonnes of LNG a year, mainly for heating, power generation and cooking. This year, a volume of 42.8 million tonnes of LNG is the expected intake, up 13.8 per cent from 37.6 million tonnes last year, according to ship-tracking data from Refinitiv Eikon. That would top 2013 LNG import levels of nearly 40 million tonnes, the country’s customs data showed. That was the year South Korea faced a series of nuclear reactor shutdowns due to a safety scandal over faulty parts, which led to an increase in gas power generation. “Gas usage for power generation sharply rose this year because the country’s nuclear utilization rate was the lowest so other power sources like gas had to fill the void,” said Shin Ji-yoon, an analyst at KTB Investment & Securities in Seoul. In the six months of the year, an average of almost half of the country’s 24 nuclear reactors were offline for planned maintenance, according to Reuters calculations based on data from state-run Korea Hydro & Nuclear Power Co. As of now, six reactors are shut down. South Korea’s nuclear utilization rates dropped to just 63.6 per cent for the first three quarters of 2018, the lowest rate ever, according to the Korea Hydro & Nuclear Power data. LNG VOLUMES EXPECTED TO BE LOWER IN 2019 Coal and nuclear together produce about 70 per cent of South Korea’s total electricity needs, although the country is trying to lower its dependence on those two fuels to shift its energy policy towards cleaner and safer energy in the long term. This year, gas power’s share of the country’s power supply mix outstripped nuclear-produced electricity over January-October, according to calculations on data from Korea Electric Power Corp (KEPCO). Gas-fired generation through October accounted for 26.7 per cent of electricity produced, up from 20.3 per cent last year, while nuclear made up 23.1 per cent, down from 27.6 per cent. Looking ahead, South Korea’s LNG demand growth for power generation is expected to hover around 1 per cent in 2019, down from nearly 20 per cent this year, robbed of room to grow as more coal and nuclear power plants are still coming online despite the plans for a long-term shift in policy, according to a report by state-funded think-tank Korea Energy Economic Institute. “We expect that (LNG) imports next year will be lower than this year but will still exceed 40 million tonnes,” said Nicholas Browne, director of Asia-Pacific gas and LNG at Wood Mackenzie.
Moderation in R-LNG prices will improve profitability for urea players: ICRA
With moderation in the R-LNG (Regasified-liquefied natural gas) prices, profitability for urea players will improve along with lowering of the working capital requirements, ratings agency ICRA has said. Natural gas is the key raw material for manufacturing urea and constitutes about 70 per cent of the total cost of production of the fertiliser. The fertiliser sector receives natural gas under the pool price mechanism wherein all the players receive gas at same cost which is the weighted average of the cost of gas consumed by the urea manufacturers. The pooled price for the fertiliser sector has risen substantially over the last 1 ½ years. Imported R-LNG prices has been on an uptrend driven by strong Chinese demand as the country partly replaced coal with natural gas as a key source of energy to combat pollution. “Spot LNG prices have already moderated by about 13 per cent towards the beginning of December 2018 from the recent peak of $11.5/mmbtu achieved in the beginning of November 2018,” said K Ravichandran, senior vice-president and group head, corporate ratings, ICRA. “The LNG prices are expected to moderate further to around $8.5-9/mmbtu by January 2019 with similar levels expected for entire Q4 FY2019. Given the outlook for the R-LNG prices, we expect pooled price to reduce to $10.5/mmbtu for Q4 FY2019 from current level of $ 11.8/mmbtu,” he said. The fall in natural gas prices would result in lower subsidy receivables thus reducing working capital borrowings. This would lower the interest outgo for urea manufacturers. “While energy savings would also decline with the fall in gas prices, the impact of the same is relatively smaller given the energy norms for several urea units have already been tightened in accordance with the New Urea Policy (NUP)-2015,” ICRA said.
CNOOC inks agreements with 9 firms for oil, gas exploration in South China
* CNOOC Ltd said on Tuesday it has signed strategic agreements with nine foreign companies to conduct exploration at two oil and gas blocks in southern China * The nine companies are: Chevron Corp, ConocoPhillips , Equinor, Husky Energy Inc, Kuwait Foreign Petroleum Exploration Co, Australia’s Roc Oil, Royal Dutch Shell, SK Innovation and Total * Exploration will take place in Block A and B in the Pearl River Mouth Basin offshore Guangdong province * Block A covers an area of 15,300 square metres (165,000 square feet) and is in water depths of 80 to 120 metres (262 to 394 feet) * Block B has an area of 48,700 square metres with water depth ranging from 500 metres to 3,000 metres
ONGC’s $1.7 billion deep sea award perks up oilfield services market
ONGC’s $1.7-billion work package, one of the biggest deep sea contracts offered in recent years, for its largest offshore block has perked up a listless global oilfield services industry and is likely to see fabrication of crucial underwater kits in the country for the first time. The state-run explorer has awarded the contract, its single-largest ever, to a consortium of BGHE (Baker Hughes, a GE company), McDermott International and LTHE (L&T Hydrocarbon Engineering for block KG-DWN-98/2 off the Andhra coast. The block has the potential to reduce India’s import dependence for oil and gas by 10 per cent. India currently imports 82 per cent of oil need and 45 per cent of gas requirement. Sources said under the local content clause of the contract awarded in October, BHGE and LTHE are expected to jointly fabricate ‘manifolds’ — structures laid on the seabed for channelising oil and gas from different wells into a single stream — locally, which will be a first for the country. McDermott will also use its engineering and other resources in Chennai besides Kuala Lumpur in Malaysia. “Built on a unique successful partnership model with McDermott and LTHE, the project will deliver leading technologies to ONGC across a full subsea scope,” Neil Saunders, head of of BHGE’s oilfield equipment unit, had said in a statement when the contract was awarded. Given the project’s size, complexity and importance of starting production on time, ONGC took the innovative step to combine the different work packages into a single integrated tender to eliminate interface issues and ensure closer monitoring of work flow. Interface issues among contractors have dogged several projects for which packages were tendered separately in the past, resulting in time or cost over-runs. ONGC expects to start producing gas by December 2019 and oil by March 2021. Total peak gas production rate is projected at 16 million cubic meters per day and peak oil output is pegged at 80,000 barrels a day. According to McDermott, the equipment and structures will be laid out at water depths ranging from 984 feet (300 metres) to 10,500 feet (3,200 metres) for connecting 34 wells in the block. This makes it technologically challenging projects in India’s east coast.