Oil and Gas May be One Reason Why India Looks the Other Way on Myanmar
While the West moves to re-isolate Myanmar after a short period of re-engagement, neighboring India is taking a more realpolitik approach to reports of massive rights abuses by the nation’s security forces. Indeed, India is doing its utmost to improve relations while the United States and European Union impose new sanctions aimed specifically at Myanmar’s military, including top soldiers involved in the abuses. It is by now evident that Myanmar’s treatment of its Muslim Rohingya population and crackdown on the media — major concerns in the West — will be subordinated to New Delhi’s broader policy aims for Myanmar and the wider region. There are several intertwined reasons for India’s pragmatic approach. First, India’s eastern neighbor is a vital link in its commercially driven “Act East” policy, a gambit aimed at expanding trade and investment through better linkages with Southeast Asia’s booming economies. India’s fast-expanding economy needs fuel to grow, and New Delhi has shown strong interest in importing oil and gas from Myanmar. Meanwhile, long-decrepit roads to the Myanmar border are being upgraded to facilitate faster bilateral trade. An agreement signed in May paved the way for entry-exit points at the border towns of Moreh in India and Tamu in Myanmar, as well as at the Rihkhawdar-Zowkhawtar at the border between India’s Mizoram and Myanmar’s Chin state. Second, India has stayed fully engaged with Naypyidaw to prevent China from stealing a march in yet another neighboring country after Beijing has made strong advances in Pakistan, Nepal, Sri Lanka and Maldives, including through its global infrastructure-building program. Just as significantly, New Delhi’s security planners want to ensure that Assamese, Naga and Manipuri ethnic insurgents based in remote areas of northwestern Myanmar are deprived of their sanctuaries. Insurgents often launch lethal raids into India’s northeast from those camps and then retreat across the border into Myanmar, beyond the reach of the Indian army. In June 2015, India’s security authorities ran out of patience and sent commandos across the border to attack rebel camps. Myanmar authorities denied any such attack took place and have always claimed their are no rebel bases on their territory. Still, the insurgent issue created new headlines in the Indian media when Myanmar’s Deputy Home Minister Major General Aung Thu met with India’s Home Secretary Rajiv Gauba in New Delhi in late October. Reports said the two senior officials held talks on a range of issues, with the local The Sentinel newspaper proclaiming in a headline that “India, Myanmar to jointly strike against Northeast rebels.” The Business Standard, meanwhile, announced that “India, Myanmar agree to act against insurgent groups operating within their territories.” LiveMint, an Indian news website, reported that India and Myanmar are going to “draw up [a] counter-insurgency cooperation plan.” If all true, the bilateral meeting would have represented a major breakthrough in security cooperation between India and Myanmar. Ethnic insurgents opposed to New Delhi’s rule have maintained cross-border sanctuaries in Myanmar since the late 1960s, and India has tried as long to persuade the Myanmar army to take action against them – preferably through the kind of joint operations that The Sentinel mentioned in its commentary. Despite the sensational headlines, nothing of the sort was agreed upon during Aung Thu’s visit. Myanmar and India only agreed to work together to prevent smuggling of wildlife and narcotics, and vaguely increase “security cooperation” along their common border, which is nothing new. Indeed, any joint counterinsurgency operation by Indian and Myanmar militaries would be impossible under Myanmar’s 2008 constitution, which clearly states that “no foreign troops shall be permitted to be deployed in the territory of the Union.” It is widely known that the main bases of India’s northeastern rebels are located in and around Taga north of Singkaling Hkamti — miles away from the Indian border and at least a week’s trek over mountainous terrain — where they appear to have a cozy relationship with nearby Myanmar army camps. Naga rebel leaders from the Indian side are known to have invested in gold mining and other lucrative business ventures in Myanmar’s upper Sagaing Region, where they are based. Assamese and Manipuri rebels are able to move more or less freely from the Taga camps across northern Myanmar to Ruili in China’s southern Yunnan province, where they buy military supplies and other necessities. The strategic reality is that Myanmar’s army is now fully occupied with fighting its own domestic insurgencies in Kachin and Shan states and cannot be bothered with the presence of rebel groups from India’s northeast who are actually good for the region’s local economies. It is also now apparent that India’s “Act East” policy, previously known as “Look East” until rechristened and ramped up in 2014 under Prime Minister Narendra Modi, is focused in part on stabilizing its long volatile eastern border. Still, India is lagging far behind China in terms of accessing Myanmar’s markets and resources. Bilateral trade between China and Myanmar amounted to nearly US$6 billion in fiscal 2016-2017 and US$7.42 billion in the first eight months of 2017-2018. China has built new dual-carriage motorways connecting Kunming, the provincial capital of Yunnan, with Ruili and other towns on the Myanmar border. China has also agreed to build a railway from Muse to Mandalay on the Myanmar side, which eventually will link up with a proposed railroad down to Myanmar’s port town of Kyaukpyu on the Bay of Bengal, giving China strategic access to the Indian Ocean. China’s fast-growing trade with Myanmar is also spilling over to northeastern India. Chinese-produced electronics, clothes, bags, household utensils and other cheap manufactures are transported across Myanmar and can be found in abundance in northeast Indian market places. By comparison, annual trade between India and Myanmar is only around US$2 billion, and the roads from the Indian side to the Myanmar border are still rough and nowhere near of the standard and quality of the infrastructure in China’s southern Yunnan province that borders on Myanmar. But Modi wants to change all that. In September 2017, he visited
Petronet LNG & ONGC Videsh eye LNG stake in US
Petronet LNG and ONGC Videsh are jointly in talks to buy a stake in Tellurian Inc’s proposed Driftwood project in Louisiana, Petronet’s managing director has said. “We have moved slightly forward (from the preliminary discussion stage)… we are evaluating it seriously and we are in serious discussion with them,” Prabhat Singh told Reuters in a phone interview on Friday. Tellurian is a natural gas company based in Houston, Texas. To be built in four phases, the Driftwood project will have a production capacity of 27.6 million tonnes per annum. India is expanding its pipeline network and building new liquefied natural gas (LNG) import terminals to boost use of the cleaner fuel in the country. Prime Minister Narendra Modi has set a target to raise the share of natural gas in India’s overall energy mix to 15 per cent in the next few years from about 6.5 per cent at present. Petronet is India’s top gas importer with no experience of the upstream business, which is why it is tying up with ONGC Videsh, the overseas investment arm of oil producer Oil and Natural Gas Corporation. “We want confirmation and confidence of upstream … we want to mitigate geological risk,” Singh said. ONGC Videsh’s managing director N. K. Verma declined to comment when asked by Reuters. Tellurian is offering a 60 to 75 per cent equity interest in Driftwood Holdings, which comprises Tellurian’s upstream company, its pipeline and the upcoming terminal that will be able to export 27.6 million tons a year of LNG, its co-founder Martin Houston told Reuters last year. Singh, however, said that Petronet was also in talks with several other players about buying a stake in assets spanning from drilling to dispensing, saying it was a bold step for the firm. “But this will deliver gas at cheap prices to India on a longer-term basis. It has merit in this, let us see how things shape up,” he said. A $500-million investment in Driftwood would give the stakeholder rights over a one million tonne/year of LNG over the life of the project, according to a presentation by Tellurian posted on the US company’s website. On a free-on-board basis gas will cost $4.5 per million British thermal units. Tellurian hopes to deliver the first LNG to partners in 2024, the presentation said. “We are negotiating on the contours offered by them (Tellurian),” Singh said.
Australia’s Invictus says it has not found oil and gas deposits in Zimbabwe
Australian-listed Invictus Energy said on Friday it had not found oil and gas deposits in northern Zimbabwe but there were indications of a “working petroleum system” which could only be confirmed by a planned exploration well. President Emmerson Mnangagwa told reporters on Thursday that Invictus had found oil and gas deposits in the Muzarabani area and had agreed to enter a production sharing arrangement with Zimbabwe once the project reached commercial production. But in a statement to the Australian Stock Exchange, Invictus tampered Zimbabwe’s expectations of an oil bonanza saying “an oil or gas discovery has not been made.” “The prospective resource estimate for the Muzarabani prospect relates to undiscovered accumulations which have both a risk of discovery and a risk of development,” said Invictus. “Although the Cabora Bassa Basin possess all the elements for a working petroleum system, a discovery can only be confirmed through drilling of an exploration well.” Zimbabwean-born Invictus Managing Director Scott MacMillan attended Mnangagwa’s news conference on Thursday. Mines Minister Winston Chitando said the well would be sunk in 2020 at a cost of $20 million and said the Muzarabani project was the largest undrilled onshore resource in Africa. Invictus, which is an independent oil and gas exploration firm whose only asset is in Zimbabwe, is using data first generated by Mobil Oil during its studies in the 1990s. Chitando said Invictus had made more progress than Mobil because it had a better knowledge of the Muzarabani basin which had a similar geological structure to Uganda and Kenya, where oil has been discovered. The southern African nation is suffering from a dollar crunch that has seen shortages of fuel and a spike in prices of basic goods in recent weeks.
Indian Oil Corp second quarter net profit down 12.5 per cent at Rs 3,326 crore
Indian Oil Corporation (IOC), the nation’s largest fuel retailer, today posted a 12.5 per cent dip in net profit for the quarter ended September at Rs 3,326 crore. The company had posted a net profit of Rs 3,805 crore in the same quarter last financial year. Total income of the company, however, rose 38 per cent to Rs 155,687 crore during the September 2018 quarter from 112,887 crore posted in the corresponding quarter last fiscal. IOC said its average Gross Refining Margin (GRM) during the six months ended September 2018 stood at $8.45 per barrel as compared to GRM of $6.08 per barrel in the same period last fiscal.
Gas allocation mechanism for power generation units in the works
In a big relief to private power companies, the government is working out a gas allocation mechanism for electricity generating units by pooling ONGC deep sea gas with LNG and subsidising the tariffs to revive about 25,000 mw projects. India has currently nearly 25,000 mw of operational gas-based capacity, all of which is stressed because of gas unavailability. The scheme, being discussed at the level of cabinet secretary-led high-level empowered committee, is proposed to be operated for next two financial years. The committee to address stress in the power sector due to fuel unavailability and regulatory issues is slated to meet on November 6. “The proposal entails price pooling of 5.45 mmscmd of ONGC deep water gas, currently with GAIL, with imported LNG and supplying it to power plants. There are two options of allocation being mulled at this stage, which could be auction of the gas or allocation by rotation to the power projects,” a senior government official said. Calculated at a cost of the present RLNG price of $9 per mmBtu, electricity tariff at the pooled price might drop to around Rs 5.90 per unit, industry experts said. “If the government subsidises electricity tariffs by Rs 1.50-2 per unit to make it affordable, the subsidy outgo would be over Rs 15,000 crore,” an expert said on condition of anonymity. ET on Wednesday reported that the oil ministry has floated a cabinet note proposing new price discovery mechanism and has removed power plants from the priority list for allocation of APM gas. Association of Power Producers director-general Ashok Kumar Khurana said pooling of gas is a positive step. “This will help stressed gas-based assets to operate and meet peak demand. With improvement in gas availability, these assets can form an important component of ancillary services,” he said. The government had launched an e-RLNG scheme in March 2015 for two years. The scheme was discontinued after two rounds of bidding after the power ministry received aggressive bids from companies. Against total requirement of 117 mmscmd, total gas supply in 2017 was 30 mmscmd. Data available with the Central Electricity Authority showed the 24,812-mw gas based power stations in the country generated higher than the target in September and in the financial year so far. The projects operated at a capacity of 23.3% between April and September. Power companies have been asking the government to restart the scheme as about 7,500-mw capacity is completely stranded while the rest is stressed.
France’s Engie rebuilds global LNG trade team in Singapore post-divestment
French energy group Engie said it is in the process of building a new liquefied natural gas (LNG) team after it completed the sale of its LNG assets to Total in July * The global LNG trading team will be headed by Gordon Water in Singapore to service both internal and external clients, Engie said in a statement * The team will help “manage the company strategic repositioning towards a leaner LNG business”, it added * Engie is close to completing a two-year plan to sell off some 15 billion euros ($17.09 billion) of non-core assets and re-invest those proceeds away from coal and into areas such as renewable energy, power grids and energy services
Bursting natural gas storage chokes off North Asian LNG demand
Rising gas storage levels in North Asia are denting demand for liquefied natural gas (LNG) ahead of a warmer than expected winter, driving at least one utility in Japan to resell winter cargoes it does not need, regional trade sources told Reuters. Storage levels in Japan and South Korea are estimated to be at their highest since at least 2015, according to data from Refinitiv Eikon. Gas tanks are brimming in China as well, according to trade sources. North Asia’s gas inventory typically peaks in October before it starts getting drawn down, but this year there are no signs yet of stocks falling, according to the data. “Due to warmer weather than usual, Japanese buyers’ demands are low and tank inventories are high,” a trader familiar with the Japanese LNG market said on Friday. At least one utility is trying to sell winter cargoes that it does not need due to high inventory, he added. Japan is likely to experience warmer-than-average weather between November and January, the country’s official forecaster said last week, implying low demand for heating. Nuclear power plant restarts at the world’s top LNG importer are also denting demand for the super-chilled fuel. Electricity generation using solar power has been growing in some parts of Japan, which is eating into LNG demand, a second source familiar with the Japanese market said. Chinese buyers are also expected to slow down spot purchases due to full storage capacity, a source familiar with the Chinese gas market said. “I think we are quite balanced and don’t have too much requirement at this stage,” the source added. TANKERS LNG is still being stored in vessels off Singapore and Malaysia waters for up to three weeks, unable to find buyers, in an unusual and expensive move. At least half a dozen LNG tankers have been floating LNG off Singapore and Malaysian waters, according to Refinitiv Eikon shiptracking data. Traders are betting that demand will increase when it starts getting colder. “Prices are very low. If they sell and demand starts to appear, the prices will rise again and it will be a big loss,” a Singapore-based trader said, adding that the companies are likely waiting for winter demand to set in.
ONGC to draw perspective plan to integrate business
State-owned Oil and Natural Gas Corporation (ONGC) will draw a new perspective plan to integrate recent acquisition Hindustan Petroleum Corporation Ltd (HPCL) and just commissioned petrochemical unit with its mainstay oil and gas exploration and production operations, its Chairman and MD Shashi Shanker said. The nation’s largest oil and natural gas producer is keen that its recent diversification into refining business as also petrochemicals is leveraged to full by integrating them with its core business. “Post-acquisition of HPCL and commissioning of OPaL petrochemical plant at Dahej (in Gujarat), the company is drawing up a perspective plan to achieve proper synergies from the integration to maximize value, optimize cost and enhance efficiency,” Shanker said. Synergies like the use of naphtha and other liquid hydrocarbons ONGC produces in the petrochemical unit set up by ONGC Petro-additions Ltd to produce value-added products as well as integrating refining stream of HPCL with company’s existing subsidiary, Mangalore Refinery and Petrochemicals Ltd can result in huge opportunities, he said. “ONGC today is chasing the hydrocarbon molecule to the last mile to derive the best value from it at the minimal cost,” he said, adding the company wants to put in place a well-knit strategic plan to bolster its presence in the entire hydrocarbon value chain. ONGC earlier this year bought government’s entire 51.11 per cent stake in HPCL for Rs 36,915 crore, adding 23.8 million tonnes of annual oil refining capacity to its portfolio that made it the third-largest refiner in the country after Indian Oil Corp (IOC) and Reliance Industries Ltd. ONGC already is the majority owner of Mangalore Refinery and Petrochemicals Ltd, which has a 15-million tonnes refinery. The idea is to prepare a strategy to strengthen the integration further so that business growth is well diversified and risk well distributed to tide over the volatility due to fluctuations in global crude oil prices, he said. The company has already mapped the production profile from its deepwater project in the KG Basin. Block KG-DWN-98/2 will help double ONGC’s gas production by 2022. The current gas production stands at 23 billion cubic meters, which is expected to reach nearly 42 BCM by 2022. Oil production is also set to increase from the present level of 22 million tonnes to 25.6 million tonnes by 2022. Also, the acquisition of Gujarat State Petroleum’s Deen Dayal West (DDW) block in KG basin has given ONGC ready infrastructure and facilities to produce from its high-pressure, high-temperature (HP-HT) fields. This will also help in early monetization of other fields in the vicinity, which are a part of HP-HT Corridor, Shanker said. “Rig has already been deployed in DDW field for drilling and hydro-fracturing in order to boost production from this field”. ONGC Group recorded a net profit of Rs 22,106 crore on a turnover of Rs 204,019 crore in 2017-18 fiscal year. The business strategy being finalised would also focus on opening up of new basins to replenish reserves and increase its production, he said. The company already operates in six out of seven discovered basins in the country. The oil production is also planned to be ramped up with various ongoing projects worth Rs 77,000 crore out of which Rs 10,000 crore is being invested towards redevelopment and enhanced oil recovery projects only.
China’s state-run Zhenhua buys first LNG cargo from Chevron
China’s state-run Zhenhua Oil purchased its first liquefied natural gas (LNG) cargo from Chevron Corp to supply a South China-receiving terminal that it won access to in a recent auction, according to Zhenhua officials on Thursday. The 100-million-cubic-metre cargo was purchased at about $0.30 per million British thermal unit discount to Japan Korea Marker (JKM) quotes on a delivered basis, the officials added. The cargo, discharged at CNOOC’s Yuedong terminal in Shenzhen, was sourced from the Australian Gorgon project operated by Chevron. Zhenhua and its local partner Longkou agreed in September to pay $26.5 million for the access to use the CNOOC facility, in the first such auction as the world’s second-largest LNG buyer pushes to open up its LNG import business dominated by top three state oil majors.
Shell profits soar to four-year high
Royal Dutch Shell third quarter profits soared to their highest in four years, boosted by rising crude prices as the company pushed ahead with one of the world’s largest share buyback programmes. The world’s second-largest listed oil and gas company saw its cash generation from operations rise by nearly 60 per cent to $12.1 billion, as deep cost savings in recent years filtered through. “Good operational delivery across all Shell businesses produced one of our strongest-ever quarters,” Chief Executive Ben van Beurden said in a statement. Net income attributable to shareholders in the quarter, based on a current cost of supplies (CCS) and excluding identified items rose 39 per cent to $5.624 billion from a year ago. That compared with a company-provided analysts’ consensus of $5.766 billion. It was $4.691 billion in the second quarter. The profits benefited from stronger oil and gas prices as well as bigger contributions from trading operations but was offset by weaker refining margins, tax and currency exchange effects. Shell launched a $25 billion share buyback programme in July, making good on a promise to boost shareholder returns following the 2016 acquisition of BG Group, in a show of confidence in its future cash generation and profit growth outlook. Shell said it completed the first tranche of buybacks in October for $2 billion and was launching a second tranche on Thursday of up to $2.5 billion by January 28. Shell’s shares came under pressure in recent months after three disappointing quarterly results that raised concerns over its ability to meet the $25 billion share buyback target on top of $15 annual dividend payout, the world’s biggest. Debt levels remained stubbornly high. Shell’s debt ratio versus company capitalisation, known as gearing, declined to 23.1 per cent in the quarter from 23.6 per cent at the end of June. Oil and gas production in the quarter declined 2 per cent from a year earlier to 3.596 million barrels of oil equivalent.