Now, GAIL to hive off its transportation business to address conflict
GAIL will not be split but will have to hive off its transportation business into a subsidiary to reduce the conflict of interest that arises with the same entity housing both the functions of marketing and transport of natural gas, according to people familiar with the plans of the oil ministry. The ministry and the Petroleum and Natural Gas Regulatory Board have considered the idea of splitting GAIL for some time now, hoping to ‘unbundle’ marketing and transportation of natural gas in the country, a necessary condition for the development of a competitive gas market. But strong resistance from GAIL, which owns most of the gas pipelines in the country, appears to have dissuaded the ministry from breaking up the company, the persons cited earlier told ET. The government appears to have bought GAIL’s argument of a local gas market not being mature enough to prompt breaking of the firm, they said. Besides, the government isn’t willing to divert the company’s top management’s attention from laying a critical gas pipeline connecting the electorally-important eastern states and taking piped gas to several politically important cities on the pipeline’s route, they said. Now, the understanding between the government and GAIL is that the company will set up a subsidiary to house pipelines, and make its dealings with rival gas marketers more transparent by setting up a web portal to provide them with real-time data on the availability of pipeline capacity, they said. It has been alleged that GAIL’s dominance in the pipeline business puts other gas suppliers as well as customers at a disadvantage. Planning to enhance their presence in the expanding local gas market, private and foreign companies have been pushing for the unbundling of marketing and transportation functions in the country. Unbundling and the government’s plan to set up a gas trading platform by the end of this year are seen as key steps towards developing India’s gas market. But without open access to pipelines and liquefied natural gas import terminals, the trading platform may not be fully effective in a country that imports about half of the natural gas it consumes. Last month, oil minister Dharmendra Pradhan had hinted at dropping the plan to split GAIL when he said his job was not to create more companies but to create more accessibility through policy. GAIL has also often reasoned that all its pipelines were self-funded and, therefore, other gas marketers should have only limited access to these assets. Alex Mack Authentic Jersey
On Iran oil crisis, India needs a long-term strategy
US President Donald Trump’s decision to renege on the US-Iran deal had created considerable disquiet in India, given its implications on our energy security. Iran is a major exporter of petroleum to India, and the US will want India to cut back and eventually eliminate its oil imports from Iran within less than four months. This newspaper had taken a position that the US cannot push India into cutting back its oil imports from Iran. Recent data from the petroleum ministry is bound to worsen these worries. In response to a Lok Sabha question, the petroleum ministry has given statistics which show that oil imports from Iran accounted for almost one-fourth of our total oil imports form the West Asian countries in the first quarter of this fiscal year. The share of Iran in total oil imports from the region has jumped by almost ten percentage points in this period compared to what it was in the fiscal years 2016-17 and 2017-18. While oil trade is extremely crucial for Iran’s economy, India also stands to gain from it. Price of oil imports from Iran has always been less than that of Saudi Arabia since 2016-17. If India were to stop its oil trade with Iran, it would face a double whammy: lose a supplier of cheap oil and face even greater price because of the supply shock, which Iran’s exit from the global oil markets will create. To be sure, it is still not clear whether India will cease its oil imports with Iran. The government’s reply in the Lok Sabha has steered clear of answering the question whether refiners have been asked to prepare for such eventualities. This could be a manifestation of the government still being undecided or not wanting to show all its cards at the moment. An oil shock will hurt even more at a time when the global economy is staring at the prospect of a trade war, inflation is worsening, and a depreciating rupee is threatening to jeopardise macroeconomic stability. Having said all this, we also need to understand that India’s high import-dependence on its energy needs mean that it is always vulnerable to sudden shocks — geopolitical or otherwise — in the global petroleum markets. Our import dependence in oil is a big reason why India cannot exploit policies such as currency devaluation to make its export competitive, as increased oil bills offset gains in exports. While diplomatic efforts must be made to find an interim solution to the crisis at hand, there are no substitutes to pursuing the long-term goal of self-sufficiency in energy. Jordie Benn Womens Jersey
Petroleum definition changed for uniformity in operations: Government
Further easing the oil and gas exploration norms in India, the government has now redefined ‘petroleum’, thereby giving operators the option to explore all hydrocarbons — including traditional oil and gas, shale, coal bed methane and hydrates — in the same field. In a notification dated July 24 amending the Petroleum and Natural Gas Rules of 1959, the ministry of petroleum and natural gas said that petroleum means “naturally occurring hydrocarbon in the in the form of natural gas or in a liquid, viscous or solid form, or a mixture thereof.” However, it will not include coal, lignite and helium occurring in association with petroleum or coal or shale. The move is likely to benefit not just state-run companies like Oil and Natural Gas Corporation (ONGC) and Oil India, but also private sector majors like Vedanta Cairn. “The amendment would open up exploration of all hydrocarbons in existing fields which is in line with the new HELP. This should help in enhancing domestic exploration and production of hydrocarbons, thereby increasing India’s energy security and reducing our dependency on imports,” said Prashant Modi, Managing Director and chief executive officer of Great Eastern Energy Corporation. This comes after the new Hydrocarbon Exploration and Licensing Policy (HELP) cleared by the Union Cabinet in March 2016, which allowed uniform license for exploration and production of all forms of hydrocarbon. The move will open up more revenue opportunities for many of the 117 companies that were operating in India after the conclusion of the ninth round of NELP. After the nine rounds of NELP, at least 11 public sector undertakings, 58 private and 48 foreign companies marked their presence in India. Even though India is not known for its shale reserves, it is believed to have at least 91.8 trillion cubic feet of CBM reserves. Already the government has conducted discovered small field (DSF I) and Open Acreage Licensing Policy (OALP-I) in which the blocks were allotted under a uniform licensing policy. However, both the rounds did not attract the interest of foreign players to India. Early this month, the Cabinet rolled out sops for companies like ONGC and Oil India by relaxing production sharing contracts (PSC) of Pre-Nelp and New Exploration Licensing Policy (NELP) blocks. This includes giving relief to companies like ONGC and Oil India on sharing of royalty and cess in pre-Nelp exploration blocks. This is after a series of measures to boost exploration, including the government relaxing rules for state-owned Coal India Ltd for extraction of natural gas lying below coal seams in its blocks in a bid to quickly boost production. Earlier, Coal India Ltd had to apply to oil ministry for a licence to extract coal-bed methane (CBM) from its coal blocks. Now, the world’s largest coal producer does not need such permission. Wilt Chamberlain Jersey
Rosneft files $1.4 billion lawsuit against Sakhalin-1 firms ONGC Videsh, others
Russia’s largest oil company Rosneft filed an 89 billion rouble ($1.41 billion) lawsuit on Monday against participants of the Sakhalin-1 oil and gas project operated by ExxonMobil subsidiary Exxon Neftegaz Ltd. The suit, received by an arbitration court in the Sakhalin region in Russia’s Far East, seeks to recover funds gained by parties between 10 July 2015, and 31 May 2018, through “unjust enrichment and interest gained by using other people’s money”, according to paperwork issued by the court. The lawsuit has been filed against five entities, claiming 10 billion roubles from Sakhalinmorneftegaz, 7.5 billion from RN-Astra, 26.7 billion from Exxon Neftegaz Ltd, 26.7 billion from Sakhalin Oil and Gas Development Co., and 17.8 billion from India’s ONGC Videsh Ltd. Sakhalin-1 is operated by Exxon Neftegaz Ltd, through which ExxonMobil owns 30% in the project. Rosneft and ONGC control 20% each. Japanese consortium SODECO owns 30%. A Rosneft spokesperson confirmed it had filed the suit, but declined to elaborate. Exxon Neftegaz said it was “aware of the court action, rejects the claims and will take action to defend the rights of the Sakhalin-1 consortium”. A preliminary court hearing was set for 10 September. Barkevious Mingo Jersey
Oil industry concerned over BNSF’s move to limit retrofit tank cars
U.S. refiners and producers are seeking ways to counter efforts by BNSF Railway Co to limit use of retrofitted oil tank cars following an Iowa derailment last month, Reuters has learned. The crackdown by the country’s largest railroad, owned by Warren Buffett’s Berkshire Hathaway Inc, could take thousands of tank cars off a key rail line at a time when producers and refiners are scrambling to hire them. Demand for oil tanker cars has surged in recent months as oil production in the largest U.S. and Canadian oil plays has outpaced pipeline capacity. The bottleneck has forced rail freight prices up and crude prices down. Lease rates for the new tank cars, called DOT 117s, have surged to more than $1,000 a month per car from $400 a month late last year, according to two brokers. Last month, 14 tank cars carrying sludgy, Canadian oil derailed and punctured in Iowa, sending some 230,000 gallons of oil into a state waterway. The tank cars were retrofits, called DOT 117Rs, according to state and federal officials. After the incident, BNSF told shippers that it was going to ban the retrofitted tank cars in all new contracts, according to three sources familiar with the discussions. Shippers include refiners and producers like Phillips 66 and Exxon Mobil Corp, along with logistics companies such as Enbridge Energy Partners LP. Since 2016, some 11,000 older tank cars have been retrofitted with thicker shells to comply with regulations issued in 2015 following a series of fiery derailments, according to the Railway Supply Institute. Thousands more will need to retrofitted by 2020 to comply with the new regulations. Many of those retrofitted cars are used to carry crude. The American Fuel and Petrochemical Manufacturers, the largest U.S. refinery association, said its members “have raised concerns with BNSF’s decision to refuse certain DOT-authorized tank cars and are currently considering options to address these concerns with the railroad.” The options being considered by the oil industry include legal action and meetings with the head of the rail company. ConocoPhillips, which owns the retrofitted tank cars that derailed in Iowa, owns a number of the redesigned cars. It deferred questions to the American Petroleum Institute (API). The API said it would continue working with federal regulators to ensure oil transportation was safe. BNSF spokeswoman Jessa Lewis said all companies involved in oil transportation by rail needed to work together to ensure only the safest tankers were used. The oil tank cars are owned by shippers, not BNSF, Lewis said. She declined to comment on whether the company had told clients that the retrofitted cars would no longer be available for new contracts. BNSF rail lines haul the most crude oil in the nation, accounting for nearly half of the 88,571 carloads moved in the last quarter of 2017, according to the latest data from the U.S. Department of Transportation. Marquise Goodwin Authentic Jersey
LNG import plan for South Australia targets first gas in mid-2020
A private firm is looking to import liquefied natural gas (LNG) to South Australia starting in 2020, around the same time as two other proposed import projects, looking to fill a supply gap as domestic gas gets sucked into LNG exports. Venice Energy, set up by former BHP Billiton executives, plans to submit a development application to the South Australian government within the next month to park a floating storage and regasification unit (FSRU) in Port Adelaide, Managing Director Kym Winter-Dewhirst said. If regulatory approvals come through by March, construction could begin by June 2019, he told Reuters in an interview. The project would be funded partly by Venice’s owners, management consultancy Integrated Global Partners, with other equity sources which have yet to be lined up. “And then we could have first gas into the South Australian market by June/July 2020,” Winter-Dewhirst said. The LNG import plan is part of a three-stage project with a budget estimated at A$750 million to A$800 million ($556 million to $593 million). That investment includes building a 500 megawatt gas-fired power plant in two phases. Japanese trading company Mitsubishi Corp backed feasibility work on the project and Venice is in talks with Mitsubishi for future participation, Winter-Dewhirst said. “We are studying many possibilities for our future business developments in Australia and it’s one of the options,” a Mitsubishi spokesman said when asked about the project. He declined to elaborate further. Venice Energy’s plan coincides with projects proposed by AGL Energy and a group called Australian Industrial Energy, backed by top Japanese LNG importer JERA, to import the superchilled fuel to the states of Victoria and New South Wales. Gas prices have soared there as domestic supply has been piped into LNG export plants in Queensland. At the same time, the dominant gas supplier to those states, ExxonMobil Corp, has also said it was considering importing LNG to Victoria. All are pushing ahead despite a recent report by Australia’s energy market operator saying it no longer expects a gas shortfall in southeastern Australia before 2030. Australia’s government commodities forecaster said in a recent report that imports could help cap soaring gas prices, but the economics might not work as it might be tough to find cheap LNG beyond 2022. Energy consultants Wood Mackenzie forecast in a report last week that only one LNG import terminal would be needed until the 2030s. However, Venice Energy’s Winter-Dewhirst said given the costs of piping gas across long distances in Australia, his company might be able to work out gas swaps with AGL’s LNG project. “They’re complementary in some ways,” he said. Venice Energy’s plans were first reported by the Australian Financial Review. Jake Muzzin Jersey
Ban on non-BS-VI-compliant vehicles: Oil, environment ministries clash in Supreme Court
In a peculiar case, petroleum and environment ministries have taken a contradictory stand before the Supreme Court on banning sale of non-BS-VI-compliant vehicles from April 1, 2020, the date by which the cleaner fuel will be made available across the country. In an affidavit, the ministry of petroleum and natural gas contended that not only manufacturing but even sale of BS-VI non-compliant or lower vintage vehicles be banned from April 2020 to realise full benefit of the cleaner fuel. This stand, however, is contradictory to the submission of ministry of environment and forests which has consistently taken a stand that automobile companies should be allowed to sell their inventory of BS-IV vehicles till the end of June 2020 for two wheelers and up to September for four wheelers. “The Public Sector Oil Marketing companies are investing approximately Rs 28,000 crore for upgradation of refineries for supply of BS-VI fuels. This investment is being made to upgrade the fuel quality for better environment. The environmental benefits of BS-VI fuels are only marginal if it is used in BS-IV or lower vintage vehicles. If sale of BS-VI non-compliant vehicles is allowed after April 1, 2020, the environmental benefits in terms of reduction in particulate matter emission is only marginal in spite of huge public investment. Hence, sale of BS-VI non-compliant vehicles should not be allowed after March 31, 2020,” the petroleum ministry said. It even hinted the cut-off date to stop manufacturing of BS-IV vehicle should be advanced to ensure such vehicles are not sold after March 31, 2020. The environment ministry had earlier told the apex court that manufacturing of BS-IV vehicles be banned and not their sale after BS-VI norms kick in to allow auto manufactures to exhaust their stocks. “If the date of shift to BSVI becomes date of registration then it would actually reduce the time available to industry for manufacturing to a mere two years or so although BS-VI fuel will not be available across the country till April 1, 2020 … It may also be difficult to have zero stock of BS-IV with dealers on March 31, 2020 as sales cannot be predicted in advance,” the ministry’s affidavit said. Advocate Aparajita Singh, who is assisting the court as amicus curiae, contended that people are dying of pollution and there was no need to give grace period to auto-makers to sell BS-IV vehicles beyond March 31, 2020. The advocate, appearing for manufacturers, said the companies will have to switch over to BS-VI vehicles from December, 2019 which would be a difficult task. Holding that the health of millions of people was more important, the apex court had in March last year dismissed the plea of automakers to allow them to dispose of existing stocks of BS-III vehicles. Chris Boswell Womens Jersey
Government considering using LNG as transportation fuel: Dharmendra Pradhan
The Government is actively considering using Liquefied Natural Gas (LNG) as a transportation fuel, Union Minister Dharmendra Pradhan said today. LNG is being imported under open general license on terms and conditions mutually agreed upon between buyers and sellers and it is being traded in the country on market-based mechanism. During Question Hour, Pradhan told the Lok Sabha that the government is actively considering using LNG as a transportation fuel. It is a new, cost-effective and clean proposal, the Petroleum and Natural Gas Minister said. To a query, he said that at present, there is no pipeline in the country to transport LNG in liquid form from LNG terminal to end user directly. “The LNG after re-gasification is being transported in the gaseous state through trunk gas pipelines from terminals to end consumers of such pipeline,” the minister said. Martin Brodeur Womens Jersey
Taiwan’s Formosa buys first ever US crude to replace Middle east oil
Taiwanese oil refiner Formosa Petrochemical has bought a US crude oil cargo for the first time to replace Middle East crude, the company spokesman said on Monday. The company bought 1 million barrels of US Mars crude to be delivered between the second-half of September and the second-half of October as its price was competitive with those of Middle East oil, Formosa’s spokesman KY Lin told Reuters. Vernon Davis Jersey
Energy giants opening natural gas spigots, fueling profit rise
The world’s largest oil companies are pumping more natural gas than ever before, helping to spur a rise in profits while sating rising global demand for fuels that can mitigate global greenhouse gas emissions. This marks a shift over the past decade for an industry that once focused predominantly on crude oil, with gas in most cases an after-thought. Now, the rise of gas-powered electric generation, surging production from U.S shale fields and the burgeoning liquefied natural gas (LNG) industry that makes shipping the fuel possible, have conspired to create a boom. BP Plc, Exxon Mobil Corp, Royal Dutch Shell Plc, Total SA and Chevron Corp have collectively increased natural gas output 15 percent in the past decade thanks to better technology and lower costs, according to data from Wood Mackenzie energy consultancy. Analysts expect all to post double-digit increases in second-quarter profit in coming days, according to Thomson Reuters I/B/E/S. “LNG is the growth commodity for these companies,” said Brian Youngberg, an energy industry analyst with Edward Jones, who expects the global LNG industry to grow at least 4 percent annually for the next five years. At Total, gas is actually 61 percent of output, up from 47 percent as recently as 10 years ago, according to WoodMac. Total is expected by analysts to post a 44 percent jump in second-quarter profit on Thursday to $3.56 billion, according to Thomson Reuters I/B/E/S. FUTURE PROSPECTS Even as gas production has risen, so too have reserves of natural gas. International energy companies saw gas reserves jump 16 percent last year to 35.33 billion cubic feet, according to a study by the EY consultancy. “There are investments and capital expenditures being made to increase the level of gas reserves, and that should only continue,” said Herb Listen, an EY energy analyst. Exxon, for its part, sees natural gas usage growing at the fastest rate of any energy type out through 2040, reaching a quarter of global demand by that time. “Worries about energy supplies have faded away, erased in large part by natural gas,” Exxon Chief Executive Darren Woods told the World Gas Conference last month in Washington, D.C. Exxon is expected by analysts to post a 62 percent increase in quarterly profit to $5.45 billion on Friday, according to Thomson Reuters I/B/E/S. Gas does have limitations. It’s harder to transport than crude oil, which can be stored indefinitely in tanks, and it must be processed right away, boosting costs. But greenhouse emissions from gas are far less than coal or oil when it is burned, boosting its appeal for a sector eager to combat allegations that it is the primary cause of anthropogenic climate change. “I’m confident that natural gas will play a central role in meeting global energy needs for decades,” Mike Wirth, Chevron’s chief executive, said at the World Gas Conference. Chevron, which operates two major LNG facilities in Australia, is expected by analysts to post quarterly profit of $4 billion on Friday, more than double year-ago levels, according to Thomson Reuters I/B/E/S. Shell put natural gas at the heart of its long-term strategy with the $53 billion acquisition of BG Group in 2016. The Anglo-Dutch company, already the world’s largest LNG trader, is expected by analysts to post a 68 percent jump in quarterly profit to $6.08 billion on Thursday, according to Thomson Reuters I/B/E/S. London-based BP is going through the fastest growth era in its history with plans to boost production by around 900,000 barrels of oil equivalent by 2021. The company launched eight projects in 2017 and is set to launch seven more this year, most of which are related to gas. Analysts expect BP to post a more-than fourfold jump in quarterly profit to $2.66 billion on July 31, according to Thomson Reuters I/B/E/S. Andrew Luck Jersey