High spot price for LNG this time of the year
Spot prices for LNG in Asia rose this week (August 1-8) to their highest for this time of the year since 2013, as buyers prepare for more extreme temperatures amid a supply crunch. The average LNG price for September delivery into Northeast Asia LNG-AS is now estimated at about $16.90 per MMBtu, up $1.30 from the previous week according to industry sources. Besides buyers already securing demand ahead of winter, temperatures in China and Japan have been soaring, increasing demand for air-conditioning, and consequently higher demand for electricity/LNG. Even though prices do usually peak during summer and winter months on account of extreme weather but it also falls in between. The prices have not fallen this year. According to “LNG Global” industry sources, Beijing Gas bought one cargo to be delivered between Sept. 26-30 into the Yuedong terminal at a price well above $15 per MMBtu. China’s Shenzhen Energy bought a cargo for Aug. 19-27 delivery to the same terminal at $16.20 per MMBtu. PetroChina sold a cargo for delivery into the Fujian terminal in China over Sept. 4-8 at $16.14 per MMBtu during the S&P Global Platts’ pricing process on Thursday. The United States continued record exports to make up for the supply disruptions elsewhere. The long term contracts are looking much more encouraging today even with crude prices hovering around $72 per barrel. The Henry Hub linked contracts are also looking good though high shipping costs can be killing. In this scenario, swapping USA supply contracts with European countries appears to be an attractive proposition for both Europe as well as India (GAIL). Well, some exciting times ahead for the LNG industry, especially for GAIL who is well endowed with US contracts
ONGC’s share in India’s oil, gas production rises
State-owned ONGC, which is often perceived as a drag on the crude oil and natural gas produced in the country, has actually seen its share in India’s oil and gas production rise over the last three years. “The share of ONGC’s crude oil production in the country’s total crude oil output has increased from 61.7% in 2018-19 to 66.5% in 2020-21,” minister of state for petroleum and natural sas Rameswar Teli said in a written reply to a question in the Lok Sabha on Monday. The same was also true for gas. Oil and Natural Gas Corporation (ONGC) operates the country’s oldest fields where a natural decline in output has set in. Other major fields in the country too are facing similar issues, leading to lower production as a whole. According to the minister’s reply, ONGC’s production has declined but it is slower than the national average. “Challenges faced in operation of exploration and production (E&P) activities are generic and ONGC is taking appropriate steps to address these,” he said. ONGC produced 21.11 million tonne out of the national output of 34.2 million tonne in 2018-19. In 2020-21, it produced 20.273 million tonne out of the national output of 30.49 million tonne. “The share of ONGC’s natural gas production in the country’s total natural gas output has increased from 75.3% in 2018-19 to 77.1% in 2020-21,” he said. It produced 24.74 billion cubic meters of gas out of the national production of 32.87 bcm in 2018-19. In 2020-21, it produced 22.09 bcm out of 28.67 bcm national output.
Reliance Industries, Reliance-BP Mobility get fuel retailing licence
The government has granted auto fuel retailing licence to seven new entities including Reliance Industries Ltd and a joint venture of Reliance and BP, Minister of State for Petroleum and Natural Gas Rameswar Teli said on Monday. The licences were given under a new liberalised rule that allows any entity with a minimum net worth of Rs 250 crore to apply for authorisation to retail petrol and diesel. Under the November 2019 policy, “marketing authorisation” has been granted to Reliance Industries Ltd, IMC Ltd, Onsite Energy Pvt Ltd, Assam Gas Company, M K Agrotech, RBML Solutions India Ltd and Manas Agro Industries and Infrastructure, Teli said in a written reply to the Lok Sabha. RIL already had a fuel retailing licence, under which it had set up over 1,400 petrol pumps in the country. But this licence was transferred to its subsidiary Reliance BP Mobility (RBML). And so, billionaire Mukesh Ambani’s firm applied and got another licence. A separate joint venture of the firm with BP, called RBML Solutions India Ltd too has got a licence. It isn’t clear if RIL and RBML Solutions will set up separate, competing petrol pumps. The “Ministry of Petroleum and Natural Gas (MoPNG) vide Resolution dated November 8, 2019, has revised the guidelines for authorization to market transportation fuels,” Teli said. “The revised guidelines would promote ease of doing business and boost private players to invest in the retail sector.” Besides doing away with the earlier requirement of investing Rs 2,000 crore in oil and gas sector to be eligible for a fuel retailing licence, the new liberalised petrol pump norms require licensees to set up a minimum of 100 outlets with at least 5 per cent of them in remote areas. The licensee is required to “install facilities for marketing at least one new generation alternate fuels like compressed natural gas (CNG), biofuels, liquefied natural gas, electric vehicle charging points etc at their proposed retail outlets within three years of operationalisation of the said outlet.” It fixes Rs 250 crore as the minimum net worth for obtaining the licence. State-owned oil marketing companies — Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) — currently own most of the 77,709 petrol pumps in the country. RBML, Nayara Energy (formerly Essar Oil) and Royal Dutch Shell are the private players in the market but with limited presence. RML has 1,422 outlets, Nayara 6,152 while Shell has just 270 pumps. BP had a few years back secured a licence to set up 3,500 pumps but has not yet started doing so. It has since decided to venture into the business with RIL with plans to scale up RIL’s present network strength to 5,500. “The entities while applying for marketing authorization have to, inter alia, provide details about their marketing plan including details of the source of supply. Such entities are free to source their supplies from different sources including PSU OMCs in their best commercial wisdom,” Teli said. While the opening up of the retail licensing is believed to usher in competition, the minister said, “at present, it may not be possible to gauge the quantum of change in countrywide auto fuel supply as the new entities have been granted marketing authorisation fairly recently.” Those granted licences include Chennai-based IMC (once called Indian Molasses Company), which specialises in oil terminals, and Assam government firm, Assam Gas Company. Assam Gas Company is in the business of gas transportation. Not much is known about Onsite Energy which was incorporated in May 2020. M K Agrotech is part of a diversified conglomerate with interests across agricultural products such as sunflower oil, real estate, and crude oil and gas extraction, while Manas Agro Industries and Infrastructure has its own brand of Liquefied Petroleum Gas (LPG or cooking gas).
PM Modi to launch free gas connection with refill and stove ahead of UP polls
Prime Minister Narendra Modi will launch the second version of Ujjwala free cooking gas connection scheme along with “a free refill and a stove” on Tuesday from Mahoba district of poll-bound Uttar Pradesh, replicating the success of its first version that had earned immense political goodwill for the BJP in the 2017 UP assembly polls, two people aware of the development said. Under the Ujjwala 2.0, the Union government will distribute about 10 million gas connections this financial year to the poor along with a free refill and a stove, they said requesting anonymity. About five years ago, ahead of the crucial UP polls, PM Modi had launched the first version of the scheme (Ujjwala 1.0) in Ballia, a district in the state on May 1, 2016. Ujjwala 2.0 is also expected to give a free refill worth over ₹800 and a free stove, one of them said. “Earlier under Ujjwala 1.0, only a deposit-free LPG connection was provided to the beneficiary amounting to a financial assistance of ₹1,600, where beneficiaries also had an option to take a loan at zero interest rate from the public sector oil marketing companies for the hot plate (stove) and the first refill,” the person added. The intent of the scheme was announced in the Budget this year. Finance minister Nirmala Sitharaman on February 1 announced extending the scheme to 10 million new beneficiaries in 2021-22. “Ujjwala Scheme which has benefited 80 million households will be extended to cover 0 million more beneficiaries,” she said in her budget speech. Besides the free first refill and a stove along with a deposit-free gas connection, the scheme in its new form will have provision for online application. A migrant family can also get separate gas connections, the person said. “Preference would be given to poor families belonging to the scheduled castes (SCs) and scheduled tribes (STs) and also for families residing in areas with lower LPG [liquefied petroleum gas] penetration than the national or state average,” he said.
IOCL aims for LNG supply scale-up by 2023
The Indian Oil Corporation Limited (IOCL) is eying a yearly supply target of 2.5 million tonnes of Liquefied Natural Gas (LNG) to Tamil Nadu by 2023 via its vast 1,444-km pipeline network, expected to be completed by February 2022. At the heart of this ambitious plan is the Rs 4,000-crore LNG terminal at Ennore, the first such facility along India’s east coast. P Jayadevan, Executive Director and State Head of IOCL for Tamil Nadu, told media persons that the five-million-tonne-per-annum LNG import terminal, commissioned in 2019, is supplying 15 per cent of its production to major customers like Chennai Petroleum Corporation, Madras Fertilisers, Tamil Nadu Petroproducts, and Manali Petrochemicals through lorries. “Currently, 85 per cent of the pipeline laying has been completed despite constraints due to the pandemic. Once the entire 1,444 kilometer LNG pipeline is completed, the quantum of LPG demand will increase. We are targeting 2.5 million tonnes per annum by 2023 and 5 million tonnes by 2025,” said Jayadevan, adding that the capacity is scalable up to 10 million tonnes per annum as the consumption grows. IOCL has already signed agreements to supply over 40 industrial customers located along the supply route. The LNG pipeline, commencing from this terminal in Ennore, would run alongside the Chennai-Tiruchy-Madurai pipeline for liquid fuels and would touch all these cities. From Madurai, it would be linked to the Ramanathapuram-Thoothukudi section of the pipeline, which has already been commissioned and operational from February. The main pipeline would get connected through branch lines and spur lines to all the major commercial or industrial clusters in Kancheepuram, Asanur, Puducherry, Sriperumbudur, Cuddalore, and Nagapattinam districts. The pipeline would also have a separate loop line passing through Thiruvallur to Bengaluru. According to the plan, the pipeline, along its route, will cover three States and 21 districts.
Assam government approves ethanol production promotion policy
Eyeing to get investment in the Ethanol, Assam government has come up with Ethanol Production Promotion Policy 2021. The policy offered a huge range of incentives to investors’ investing in the sector. However, incentives will be applicable to Ethanol units selling their produce to the Oil Manufacturing Companies (OMCs) The State Cabinet has approved the Assam Ethanol Production Promotion Policy 2021. The Policy shall be valid upto 31st March 2026. Assam’s industries and commerce minister Chandra Mohan Patowary said that Assam is the second State in the country to bring out an ethanol policy, and is thus among the pioneers in the line. The incentives under the Policy to standalone green-field ethanol producing industrial units – catering solely to Oil Manufacturing Companies (OMCs) for blending with petrol and diesel include Capital Subsidy at 20% of the cost of Plant and Machinery, with maximum Rs 5 crores – in addition to the 30% Capital Subsidy under provision of under North East Industrial Development Scheme (NEIDS)2017. Besides power Subsidy Re 1 per unit, in addition to the Rs 2 per unit offered under Industrial and Investment Policy of Assam 2019, for a period of 5 years from the date of industrial production; subject to an overall maximum of Rs 75 lakhs per annum. 5% Interest Subsidy on working capital loan for 5 years subject to an overall ceiling of Rs 50 lakhs per annum, in addition to the 2% interest subsidy offered under Industrial and Investment Policy of Assam 2019; and the 3% interest subsidy under NEIDS 2017; The policy offered, “100% SGST Reimbursement for a period of 5 years, upper limit being 250% of Fixed Capital Investment; in addition to the reimbursement of the central share of the CGST, IGST and Income Tax offered under NEIDS 2017 for a period of 5 years; 100% Exemption of Land Conversion Fees for conversion of land to industrial class, Employment Incentive in the form of reimbursement of expenditure on account of provident fund contribution of permanent resident employees for 5 years; and Skill Development Subsidy of Rs 20,000 per employee, the incentive being applicable only for training of permanent resident employees. The eligible units shall also enjoy 100% exemption of Stamp Duty and Registration Fees, subject to a monetary ceiling of Rs 25 lakhs only. The Ministry of Petroleum & Natural Gas formulated the National Policy on Biofuels 2018, which aims to increase the usage of biofuel in the energy and the transportation sector. India’s net import of petroleum was 185 million metric tonnes at a cost of US $55 billion in 2020-21 with a lion’s share of its utilization having been in the transportation sector. Promoting the use of biofuel like ethanol as a blend stock with main automotive fuel like petrol or diesel can definitely alleviate the draining of the Forex Reserves. NITI Aayog has also brought out a detailed Roadmap for Ethanol Blending in India. The minister said, ” Assam has four refineries and produces huge amounts of petrol and diesel, which ensures viability and promise for ethanol projects in Assam. IOCL, which has been importing ethanol for its blending programme and the company is contemplating setting up a captive ethanol plant. Several investors have sent feelers for investing in the sector.” He said Numaligarh Refinery Limited (NRL) wherein Assam Government has recently raised its share to 26%, is undertaking a JV project with 2 European companies to set up a bio refinery near its existing refinery in Numaligarh which on being commissioned in 2022-23 shall convert 300,000 tons of dry bamboo annually into bio-ethanol and other biofuels. NRL has a 50% stake in the Rs 2600 crore project. Ethanol imports reached a record 750 million liters in 2019, covering over 30% of its total demand. Domestic ethanol production can attenuate the import graph, and the Ethanol Policy of Assam can go a long way in fulfilling that role.
$300-400 million investment expected in latest oil, gas bid round
India on Friday launched a new oil and gas exploration bid round, hoping to attract USD 300-400 million investment in discovering hydrocarbon reserves in the country. As many as 21 blocks or areas are on offer in the Open Acreage Licensing Policy (OALP) Bid Round-VI, which will close for bidding on October 6, an official press statement said. India is 85 per cent dependent on imports to meet its oil needs and finding newer reserves through exploration rounds like OALP-VI will help cut that reliance. The 21 blocks are spread over 11 sedimentary basins and 9 states covering 35,346 square kilometres of area. Of these, 15 blocks are onland, 4 lie in shallow waters and two are ultradeep sea. “It is expected that this bid Round-VI would generate immediate exploration work commitment of around USD 300-400 million,” the statement said. The government has so far conducted five bid rounds since the Hydrocarbon Exploration and Licensing Policy (HELP) was launched in March 2016. The last bid round, where 7 blocks were offered, was launched in August 2019 and closed in January 2017. In the previous five bid rounds, 105 blocks for exploration of oil and gas were bid round. Of these, billionaire Anil Agarwal’s Vedanta Ltd walked away with 51, the bulk of it in the very first round. State-owned Oil India Ltd (OIL) won 25 and Oil and Natural Gas Corporation another 24. The joint venture of Reliance Industries and BP got one block. Indian Oil Corporation (IOC), GAIL, BRPL and HOEC too got one block each. The 105 blocks spanning to an area of around 156,580 sq km in over 17 Sedimentary Basins of India attracted total committed investment of around USD 2.378 billion,” the statement said. Under OALP, explorers can identify any area outside of the ones that are already with some company or other, for prospecting of oil and gas. The areas identified are to be clubbed twice a year and offered for bidding. The firm identifying the area gets a 5 point advantage. This policy is different from the past where the government identified areas and offered them for bidding. Allowing explorers to choose an area based on their assessment of prospects are going through geological data given them a lot more freedom to demarcate and identify blocks. While blocks in Category-I basins are awarded to a company offering the highest share of the revenue from oil and gas produced, those in Category-II and III are bid out to those offering maximum exploration or investment commitment. Category-I basins have established reserves and fields that are already producing while Category-II basins are ones that have contingent resources pending commercial production. Category-III basins are ones that have prospective resources awaiting discovery. In the current round, 12 blocks lie in Category-I basins while 4 are in Category-II and the remaining 5 in Category-III. Features of OALP round include reduced royalty rates, no oil cess, uniform licensing system, marketing and pricing freedom and revenue sharing model. Exploration rights are offered on all retained area for full contract life, it said adding concessional royalty rates apply in case of early commercial production. There is no revenue sharing in Blocks falling in Category II and III Basins except in the case of windfall gains.
Gas leak from ONGC pipeline triggers panic in South Tripura
Agartala, Gas leak from a pipeline of the state-run ONGC at Dhananjoynagar in South Tripura district triggered panic on Friday, officials said. Locals saw in the morning that gas was gushing out of the pipeline. They immediately informed the Fire Services and local authorities. A team of technical experts from ONGC was rushed to the spot and the leakage was plugged, bringing the situation under control, officials said. Belonia Sub-divisional Magistrate Manik Lal Das, who visited the site, said the situation in the area is normal.
Saudi oil giant Aramco sees half-year earnings climb to $47B
Saudi Arabia’s oil-producing company, Aramco, announced Sunday a net income of around $47 billion for the first half of the year, double what it earned over the same period last year when the coronavirus grounded travel and pummeled global demand for oil. This puts Aramco back squarely where it was before the pandemic struck and sunk earnings to $23.3 billion in the first six months of 2020. Aramco CEO Amin Nasser said the company’s second quarter results “reflect a strong rebound in worldwide energy demand.” “While there is still some uncertainty around the challenges posed by COVID-19 variants, we have shown that we can adapt swiftly and effectively to changing market conditions,” he said. The company also confirmed in its earnings report that its performance in the second quarter of 2021 “was primarily driven by higher crude oil prices.” Benchmark Brent crude oil traded just over $70 a barrel Friday, up from the $45 a barrel range it hovered at this time last year. The majority state-owned oil company said net income for the second quarter was $25.46 billion compared to the dramatic figure of just $6.6 billion last year. This quarter’s figure is slightly higher than the $24.7 billion it earned in the second quarter of 2019, before the coronavirus. Its second quarter earnings are also an improvement from the first quarter of the year, which raked in $21.7 billion. Saudi Arabia has led global efforts by major oil producers to curb output in order to keep prices from crashing as coronavirus uncertainty impacts consumer demand for crude. Under the agreement, the kingdom has been producing between 8-9 million barrels per day since May 2020. Aramco’s financial health is crucial to Saudi Arabia’s stability. Despite massive efforts by Saudi Crown Prince Mohammed bin Salman to diversify the economy, the kingdom still depends heavily on oil exports to fuel government spending. The company said it will uphold its commitment to pay out dividends of $18.75 billion for the second quarter as part of its promise to pay $75 billion in annual dividends. Most of that payout is to the company’s primary shareholder, the Saudi government. Its operating cash flows and cash proceeds were buoyed when it signed a $12.4 billion pipeline deal with a consortium led by a U.S.-based group, as well as a $6 billion Shariah-compliant bond issuance.
Final phase of Ennore LNG pipeline to be completed by Feb 2022
Indian Oil has said it will complete the final phase of Ennore LNG pipeline by February, 2022 which will link Ennore and Ramnad. The 1,444 km long LNG pipeline, which is being laid by the pipelines division of IndianOil Corporation, has completed about 85% of the work, said executive director and state head of Indian Oil, P Jayadevan. “We have completed the construction and commissioned the gas supply through the main trunk (i.e) gas pipeline from Ennore to Manali currently, and will soon complete the third and final phase by February, 2022,” he added. The LNG Pipeline commencing from this terminal in Ennore would run alongside the existing Chennai, Trichy, Madurai pipeline for liquid fuels and touch all these major cities. From Madurai it would be linked to the Ramnad – Tuticorin section of the pipeline which has already been commissioned and is operational from February this year. The main Pipeline would be connected through branch lines and spur lines to all the major commercial and industrial clusters in Kanchipuram, Asanur, Puducherry, Sriperumbudur, Cuddalore, Nagapattinam. The pipeline would also have a separate loop line passing through Tiruvallur to Bengaluru. Along its route the LNG line would cover three states and 21 districts.