IHS: U.S. to be net exporter of petroleum by 2020s
A new report says the U.S. will become a net exporter of petroleum by the early 2020s, the first time since the country would achieve such a feat since at least 1949. Research firm IHS Markit says continued growth in U.S. production of crude oil and natural gas liquids will push the country toward becoming a net exporter of petroleum, which the firm says included refined products like gasoline. The report examines how growing U.S. shale oil and gas resources have lowered the trade deficit by an estimated $250 billion in 2017 compared to if U.S. petroleum production had stayed at 2007 figures. The U.S. shale oil and gas industry began growing in earnest soon after 2007. In 2007 U.S. crude oil production was nearly 5.1 million barrels a day. Ten years later, production had grown to 9.4 million barrels a day. The Energy Department recently estimated that U.S. output has reached 11.6 million barrels a day. Exports have increased exponentially from just 27,000 barrels a day in 2007 to nearly 1.2 million barrels a day in 2017, according to data from the Department of Energy. In 2017 the U.S. was a net exporter of natural gas, natural gas liquids such as propane and butane, and refined products. IHS data show crude oil imports declining from more than 10 million barrels a day in 2007 to 7 million barrels a day.
Frontline beats forecast as oil tanker market improves
Oil tanker company Frontline posted a surprise third-quarter profit on Friday, helped by rising rates for its fleet, sendings its shares up almost 5 per cent. The Oslo-listed shipper controlled by billionaire investor John Fredriksen said the sector is finally emerging from its lengthy downturn. “Tanker markets are beginning to rebalance following 18 months of extremely challenging conditions and we are optimistic that the market has now exited the cycle trough,” Chief Executive Robert Hvide Macleod said in a statement. “Oil inventory draws, fleet growth and production cuts have been against us, but these important factors are now turning in our favour. The most important factor, oil demand, remains strong.” Frontline also said it has ordered exhaust gas cleaning systems for a further 12 vessels, which it believes will make its fleet more attractive when tougher international emissions regulations kick in from 2020. Net earnings for the July-September period swung to a profit of $2.2 million from a loss of $24.1 million in the same period last year. Adjusted for one-off gains, the company lost $8.4 million in the quarter but still beat a forecast loss of $21.9 million in a Reuters poll of analysts. Frontline shares were up 4.7 per cent by 0810 GMT, outperforming a 1.5 per cent gain for the Oslo benchmark index.
Papua New Guinea paves way towards new natural gas project
Papua New Guinea Friday signed a deal with energy giants Total and ExxonMobil on a proposed new project that would significantly boost the natural gas exports from the poor Pacific Island nation. The parties hope to finalise the Papua LNG (liquefied natural gas) project by the first quarter of next year, the French firm said in a statement, adding that they would launch initial engineering studies. The new project, if realised, will complement production from a $19-billion natural gas plant developed by ExxonMobil that began shipping gas throughout Asia in 2014. In a speech at a gathering of business leaders in Port Moresby, Total CEO Patrick Pouyanne described the deal as a “first stone, an important stone” towards developing the production of natural gas, which he said would be at the “core of the evolution of the energy landscape.” It would involve two new “trains” — or production units — of 2.7 million tonnes per year. Total said the proposed project — located in the Gulf Province 280 kilometres (175 miles) west of Port Moresby — will “increase Papua New Guinea from a two to four train producing supplier.” “We are fully committed to the success of the Papua LNG project, which benefits from a favourable geographical location close to Asian markets,” said Pouyanne. The existing ExxonMobil plant includes gas production and processing facilities in PNG’s Southern Highlands and Western Provinces, storage facilities on the Gulf of Papua and more than 700 kilometres of pipelines. At its peak, more than 21,000 people were employed during construction with the operators having to overcome flooding and extremely steep slopes as they built infrastructure including airfields and roads from scratch. “All told, the onshore pipeline contains enough steel to build 20 Eiffel Towers,” said Neil Chapman, senior vice-president of ExxonMobil. The project supplies four major companies in Taiwan, Japan and China and is expected to produce an estimated nine trillion cubic feet (255 billion cubic metres) of LNG over its 30-year life.
Will buy back govt shares or pay interim dividend, not both: ONGC to FinMin
Debt-ridden national oil company Oil & Natural Gas Corp (ONGC) has said that it would either buy back government shares in the company or pay interim dividend. Not both, as it needs time to build a corpus for the payout. “Due to the existing legal framework, ONGC has to finance the buyback through internal resource accruals instead of loans borrowed from banks or financial institutions. Hence, ONGC requires time up to mid-December for arranging the internal resources,” it informed the Finance Ministry. “ONGC will then have to substantially defer the interim dividend for current (fiscal) year and shift the same to final dividend payable in the next financial year,” it wrote. Sources said the Ministry is yet to communicate which of the two routes it wants ONGC to follow. ONGC is one of the three oil companies identified by the Ministry’s Department of Investment and Public Asset Management (Dipam) for government share buyback to meet the Ministry’s divestment target of Rs 800 billion. The exploration firm has to buy back 3 per cent of the government-held shares for which it requires Rs 48.26 billion. Last fiscal year, on government instructions, it paid interim dividend twice amounting to 105 per cent or Rs 67.36 billion. The other two — national oil company Oil India Ltd (OIL) and oil refining and marketing Indian Oil Corp (IOC) — were directed to buy back 5 per cent each. Citing poor liquidity and other financial liability, ONGC in August sought an exemption from the buyback saying it needed money to service the unsecured loan of Rs 255.9221 billion that was taken to partially fund purchase of gas assets of Gujarat State Petroleum Corp (GSPC) as well as state-run refining and marketing company Hindustan Petroleum (HPCL). However, the Committee on Management of Government Investment in Central Public Sector Enterprises refused to exempt ONGC and suggested that the latter could borrow from the market for the purchase. Subsequently, ONGC quoted Rule 17 of the Companies (Share Capital & Debenture) Rules and Section 4 of the SEBI (Buyback of Securities) Regulation which do not allow a firm to borrow money from banks or financial institutions for the purpose of buying back its shares. Since the buyback could only be through internal accruals, ONGC argued that it would have to “defer the interim dividend for the current fiscal year and shift it to next financial year along with payment of final dividend”. It said that it needed 45 days’ time from the date of Board approval to generate the internal accruals to buy back three percent out of the 67.45 per cent shares held by the government. On October 31, it informed the Bombay Stock Exchange of fixing November 16 as the Record Date for paying interim dividend, if any. However, on November 3 the ONGC Board withdrew the Record Date since it did not get any feedback from the Finance Ministry.
To meet divestment target: $2 billion share sale of ONGC, IOC & OIL in the pipeline
The government is considering a plan to sell shares worth $2 billion in Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC) and Oil India Ltd (OIL) to help meet this year’s divestment target, according to people familiar with the matter. This would be on top of the proceeds generated from a likely Rs 10,000-crore share buyback by these companies. The finance ministry is planning the mix of share sales and buybacks by state oil companies with about a fourth of the Rs 80,000-crore asset-disposal target having been met thus far, said the people. The government is considering the sale of about 5% equity stake in ONGC, 3% in Indian Oil and 10% in Oil India, people with knowledge of the matter said, cautioning that the quantum could vary by the time the government launches offers for sale. The timing of the sale is currently unclear but it could take place in a month or so. Both will depend on investor sentiment and details of the buyback plans, the people said. To meet divestment target: $2 billion share sale of ONGC, IOC & OIL in the pipeline A 5% stake in ONGC was worth about Rs 10,000 crore at the end of trade on Thursday with the stock falling 1.6% to Rs 158.45, while a 3% stake in IOC was worth Rs 4,200 crore with the stock up 0.7% at Rs 146.35. A 10% stake in Oil India was worth Rs 2,300 crore — the stock was up 0.25% at Rs 203.50. That would mean, at current market rates, a planned share sale could fetch about Rs 16,500 crore ($2.3 billion). The government is likely to offload these shares at a 5% discount to market rates, sources said. Earlier this month, the government sold a 3% stake in Coal India via the offer for sale (OFS) or auction route. If the share sale goes forward at the levels mentioned above, the government’s stakes would fall to 62.48% in ONGC, 53.75% in IOC and 56.13% in Oil India. That’s likely to erode further if the government tenders its shares in the expected buybacks. The respective boards are set to consider proposals to this effect, prompted by the government pushing them, said the people cited above. Oil India will consider a buyback proposal on November 19, the company has said in a regulatory filing. The exercise is likely to raise about Rs 1,100 crore, sources said. ONGC will probably buy back shares worth Rs 4,800 crore and Indian Oil’s buyback could be about Rs 4,000 crore in size, they said. The companies are said to have initially resisted the buybacks but are said to have come round, said the people cited above. Executives had warned the government of a dividend cut this year if they were forced to repurchase shares. But, according to sources, companies will have to at least match last financial year’s payout. The companies had opposed the buyback plan on the grounds that they didn’t have enough cash reserves and needed internal resources to fund their capex plans. But these arguments do not seem to have cut any ice with the government.
Tankers storing LNG in Asian waters double as pre-winter demand disappoints
Tankers storing liquefied natural gas (LNG) in Asian waters have more than doubled in number since late October as traders have been caught off guard by warmer-than-expected temperatures that have capped demand and pulled down prices. Spot market demand ahead of winter has been slowed by the forecasts for warmer temperatures this year in North Asia, with onshore storage tanks filling up. “People were expecting China to buy as much as last year in the spot market, but the weather so far has been quite mild and I don’t think they were anticipating that,” a Singapore-based LNG trader said. LNG prices last year climbed steadily from mid-July to January as China’s gasification push for winter heating sparked higher imports. But this year, buyers from the world’s top natural gas importer – via pipeline and tanker – have been spreading out their purchases more. Now about 15 to 20 LNG tankers holding at least 2 million cubic metres of LNG worth more than $400 million at spot market prices are floating in Asian waters, industry sources said. That’s up from a half-dozen tankers being used for storage in Asia three weeks ago. Globally, the number of such LNG tankers stands at 20 to 30, one of the sources said. This has helped to drive up LNG tanker rates to record highs, the ship broking and trading sources said. Most of the traders storing cargoes in the tankers are “seeking better winter pricing … holding out against rising charter rates to achieve an acceptable profit on the molecules,” shipbroking firm Braemar said in a weekly LNG report last week. This is “creating pain for those producers who are still forced to lift cargoes from terminals which are approaching tank tops.” Refinitiv Eikon data shows at least eight tankers storing LNG in Singapore waters while two were in Malaysian waters. More than five vessels that had been storing LNG are now on the move or have discharged the cargoes, the data shows. Storing LNG on tankers out at sea, unlike crude oil, is generally seen as a risky bet, given the high costs of storage and the fact that cargoes degrade over time by evaporating. As with other commodities, the play is typically triggered by a market structure known as contango, in which prices for immediate delivery are cheaper than later months. The contango, which was at about $1 per million British thermal units (mmBtu) last month, has since narrowed to about 50 cents or less, traders said. The last time LNG was put into floating storage on a large scale was in 2014, though the number of tankers was lower, the Singapore LNG trader said. Not all the cargoes are stranded without buyers. Some of the companies likely secured the tankers during the summer when shipping rates were far lower, and stored them in anticipation of a pick-up in prices, traders said.
GEECL plans to exploit shale worth $2.78 billion at its Raniganj (South) block
Great Eastern Energy Corporation Limited (GEECL), a London Stock Exchange-listed Indian coal-bed methane (CBM) producer, today announced a resource upgrade at its Raniganj (South) block in West Bengal, finding prospective shale resources with a discounted valuation of over $2.78 billion. “We are delighted to report this significant uplift in the Original-Gas-In-Place for our Raniganj (South) block of up to 9.25 trillion cubic feet (TCF) and with an undiscounted value of $13.78 billion and a discounted value of $4.31 billion,” said Prashant Modi, managing director and chief executive officer at GEECL. The company added that ARI, an independent petroleum evaluator, has conducted the assessment in accordance with the classification guidelines set out in the Society of Petroleum Engineer’s Petroleum Resource Management System. According to the assessment done by ARI, the company’s flagship Raniganj block has an estimated shale resource of 6.63 TCF under a high estimate, 3.51 TCF under best estimate, and 1.40 TCF under low estimate. Modi said that the government’s recent decision of permitting exploration and exploitation of all types of hydrocarbons including shale resources under the existing CBM contracts, prompted the company to explore shale reserves in its blocks. He said that the company would first make the initial exploration programme followed by the pilot production of shale. He added that the initial capital investment would be marginal. Modi further added that the company was taking a hit on account of stranded taxes arising due to exclusion of natural gas from the goods and services tax (GST) but added that the firm remains hopeful of the inclusion of natural gas in the GST. “We believe that the shale gas resources can be explored and developed cost-effectively in tandem with our successful ongoing CBM development programme through the sharing of surface and other infrastructure facilities. We are currently planning the initial exploration programme for exploiting shale in our block, and will make a further announcement in due course when we commence the same,” Modi said in a statement. The company plans to invest Rs 2,000 crore to complete drilling of the remaining 144 wells at its flagship Raniganj (South) license area.
India’s gas regulator invites bids for new round of city gas distribution
India’s gas transportation regulator Petroleum and Natural Gas Regulatory Board (PNGRB) invites bids for setting up city gas network in 50 areas, said DK Sarraf, regulator chairman. Sarraf said on Wednesday that PNGRB aims to award contracts for the new round by end of February 2019. The 50 areas up for bids will cover 24 percent of population, while the previous round of city gas bids covered 26 percent of population. This was the tenth round of city gas bids, and along with other previous rounds, it would cover 14 of the 15 most populated cities of India, he said. India has a target to raise the share of natural gas in the overall energy basket to 15 percent by 2030 from 6.5 percent. PNGRB is targeting to provide connection to all households in the area within 8 years of the contract win – Sarraf.
Crude oil could drop below $50, warn analysts
Oil prices remain under the pump on Wednesday following the commodity’s worst single day of trading in several months, as global fears surrounding demand worry investors. By around 8.50 am in London, the price of West Texas Intermediate, the US benchmark, is down 0.3 per cent to trade at $55.49 per barrel, while Brent crude, the international benchmark, is just in the red, down around 0.1 per cent at $65.44. If these prices stick, oil will endure a 13th straight day of losses, further extending its record losing streak. “It’s been a perfect storm for oil as of late, with lower global growth expectations, higher output from the US, Russia and Saudi Arabia, waivers on Iranian sanctions and general risk aversion in the markets sending Brent and WTI rapidly into bear market territory,” Craig Erlam, senior market analyst at OANDA, said on Wednesday. Tuesday’s drop, which saw both Brent and WTI fall about 7 per cent, was driven largely by a tweet from US President Donald Trump, in which he urged Saudi Arabia not to cut production. The tweet came in response to Khalid al-Falih, Saudi Arabia’s oil minister, saying the kingdom is likely to cut production by around 500,000 barrels. Oil prices have tumbled into a bear market — down at least 20 per cent from their October peaks – amid concerns of growing stockpiles. Earlier in November, the Trump administration granted eight countries temporary waivers from the sanctions it placed against Iran that were designed to cut off its oil from the rest of the world . And data released last week by the Energy Information Agency showed US oil inventories climbed by 5.8 million barrels in the week to November 2, while production hit a weekly record of 11.6 million barrels per day. The oil market had already been under pressure since the beginning of October as trade tensions and concerns over rising interest rates weighed. Prices may well have further to fall. Erlam said that he “wouldn’t be surprised to see” prices for WTI to slip to $50 per barrel, and Brent to $60. “It’s not too long ago that people were talking about the prospect of $100 a barrel oil but that now feels like a distant memory.” The latest slide — extending the falls in both contracts to around 25 per cent from the recent cyclical highs struck in late October — was sparked by a warning from Opec about the outlook for global demand. “Opec lowered its global oil demand forecast by 70,000 barrels per day (b/d) in its latest monthly report,” said strategists at ANZ Bank. “It said doubts on emerging market demand would see growth in world demand for crude fall to 1.29mb/d in 2019. As a consequence, the appetite for its crude would be about 31.5mb/d, which is about 500kb/d lower than its forecast of only two months ago. “This was enough for systematic traders to add to their shorts, while macro investors liquidated their long positions.” While Opec’s warning over the demand outlook, on top of Saudi Arabia’s decision to reduce crude output by 500,000 barrels per day in December, suggests Opec may strike a deal to cut output when the cartel meets in early December, Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, says finding a broader agreement may not be that simple.
CNG, PNG coverage set to expand to 70% population
The government is offering 50 more ‘geographical areas’ for setting up city gas service in 124 districts in 14 states with the aim of expanding the CNG and PNG service coverage to 70 per cent of the country’s population. Prime Minister Narendra Modi will next week launch the 10th city gas licensing round offering these fields and mark the beginning of work on city gas projects in at least 62 cities that were offered in the ninth round that concluded earlier this year. The 50 areas to be offered in upcoming round will cover 24 per cent of the country’s population and 18 per cent of the area. In the ninth round, 86 areas spread over 174 districts in 22 states and Union Territories were offered to cover 26 per cent of the population and 24 per cent of area. Sectoral regulator DK Sarraf said several of the 86 areas from the ninth bid round have been excluded for the PM’s function due to various reasons. Five have been excluded due to litigation and 16 others due to the poll code as they are in Rajasthan, Madhya Pradesh and Telangana where assembly elections are on Bids for the 10th round will close on February 5 and areas will be awarded by the end of February. First CNG station or PNG service in the areas awarded in the previous round will take at least 1-2 years to become operational. The government is targeting raising share of natural gas in the primary energy basket to 15 per cent from 6.5 per cent in the next few years and the bid rounds are aimed at fulfilling that objective. The areas offered in the 9th and 10th round are close to natural gas pipelines and companies have been given eight years for the completing rollout of city gas infrastructure in their areas. “Future bid rounds will be slower and smaller as new areas can be offered only when gas pipeline is laid to connect them to the gas grid,” Sarraf said. “Next round will happen after some gap. In the two rounds (9th and 10th), we have covered 50 per cent of India’s population and 42 per cent of the area,” he said.