Unified tariff on gas pipelines from September
In yet another reform initiative in the oil and gas sector, pipeline operators in the country may shift to a unified or pooled tariff regime for inter-connected cross-country gas pipelines from September 1. A unified tariff may do away with levy of multiple tariffs on customers, ensuring equitable distribution of gas and uniform gas-based economic development across the country. The current system of tariff determination leads to multiple pipeline tariffs on customers who have contracted for gas which flows from multiple pipeline operators. According to official sources, downstream oil and gas regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB) has finalised the draft regulation on unified tariff and would fix the tariff by August-end and implement it from the first day of September. With this, one nation, one gas grid, one pricing would be implemented across the country, bringing relief to customers in far-flung areas who were being charged extra for gas transmission but raising charges for other existing customers to bring about price equalisation. According to a report by ICICI Securities, unified tariff mechanism would boost utilisation on GAIL’s Jagdishpur-Haldia-Bokaro-Dhamra pipeline (JHBDPL) by virtue of lowering of tariff under pooling of transmission prices. When the Cabinet Committee on Economic Affairs approved the JHBDPL, GAIL had proposed unified tariff to ensure viability of this pipeline, and had estimated unified tariff on the JHBDPL and other inter-connected pipelines at Rs 57/mmbtu vs Rs 173/mmbtu, if fixed separately for the JHBDPL.
GAIL urges government to use diplomacy to help rework expensive US LNG deals
GAIL has urged the government to use its diplomatic ties with the US to help rework the company’s expensive gas purchase deals with the American suppliers at a time the liquefied natural gas (LNG) rates in the spot markets have fallen to record lows, according to people familiar with the matter. GAIL has contracts for the purchase of 5.8 million tonnes a year of liquefied natural gas (LNG) with two US suppliers, deals that were signed between 2011 and 2014 as LNG prices roared across the world. A global price reversal since leading to a recent collapse in the spot market has made it harder for GAIL to market the expensive US gas. GAIL has written in a recent letter to the government that the US suppliers should consider aligning contract prices with current market realities and reduce annual volumes, according to the people familiar with the matter. GAIL wants the total supplies for the contracted 20 year-term to be stretched over 25 years, the person said GAIL is banking on strengthening ties between India and the US, and hopes a government-to-government dialogue could get private US suppliers to the negotiating table, he said. “GAIL is contract-bound to buy US LNG but if it can’t further sell this to customers, how long can it keep buying and paying for US LNG. The US suppliers should understand this,” said the person. The rate for US LNG brought to Indian shores is about thrice that of the one bought in the spot market these days. Spot rates for India delivery have dived to $2 per million metric British thermal unit (mmBtu) and a global supply glut is expected to keep rates low for long. GAIL’s costs mainly include Henry Hub gas price, liquefaction and transport costs and the company primarily wants modification in liquefaction rates, which are about $3 per mmBtu, according to people cited above. GAIL has tried in the past to renegotiate LNG deals but was always faced with unyielding US suppliers. By contrast, it has been able to rework its contract with Russia’s state-run Gazprom. Petronet LNG, India’s largest gas importer, too has successfully renegotiated with ExxonMobil and Qatar for long-term LNG supplies.
India’s Petronet renews investment deal with Tellurian
India’s top gas importer Petronet LNG has renewed its initial deal to consider investing $2.5 billion in U.S. liquefied natural gas (LNG) developer Tellurian Inc’s Driftwood project, Indian sources familiar with the matter said. Petronet and Tellurian now have time until the end of December to finalise the deal, they said. The memorandum of understanding, which lapsed on May 31, was renewed last week ahead of a virtual meeting between Indian oil minister Dharmendra Pradhan and U.S. Energy Secretary Dan Brouillette.
World Bank says global gas flaring hit highest in over a decade in 2019
Global gas flaring increased to 150 billion cubic meters (bcm) in 2019, the highest level in more than a decade, primarily due to increases in the United States, Venezuela and Russia, the World Bank said on Tuesday. Gas flaring, the burning of natural gas associated with oil extraction, in fragile or conflict-affected countries climbed from 2018 to 2019, in Syria by 35 per cent and in Venezuela by 16 per cent, the World Bank report said. Flaring was up 23 per cent in the United Sates, and 9 per cent in Russia. The top four gas flaring countries – Russia, Iraq, the United States, and Iran – continue to account for 45 per cent of all global gas flaring, for three years running (2017-2019), the World Bank said. However, gas flaring fell by 10 per cent in the first quarter of 2020, with declines across most of the top 30 gas flaring countries, it added. “The current COVID-19 pandemic and crisis brings additional challenges, with sustainability and climate concerns potentially sidelined,” said Christopher Sheldon, practice manager in the Energy & Extractives Global Practice, World Bank.
Daily fuel price hike may push up freight charges by 20pc, say truckers
Demanding monthly or quarterly revision in diesel prices, which saw an increase for 23 days on the trot last month, a truckers body on Sunday warned that transporters may be forced to increase freight charges by 20 per cent as the daily hikes in fuel prices are making operations “unviable”. Fuel charges account for as much as 65 per cent of the operating cost of a truck. Toll charges are another major component, which is about 20 per cent of the operating cost. “Already the demand is low and the idling of the vehicles (trucks which are off-road) is at about 55 per cent. It has become difficult to sustain operations. The road transport sector is devastated due to back-to-back lockdowns amid COVID-19,” Bal Malkit Singh, chairman core committee and former president of All India Motors Transport Congress (AIMTC) said in a statement. “Course correction” in freight (charges) is definitely required sooner or later for the survival of the truck operators, he said, adding,”we have no option but to pass on the increased hike to the consumers as to run the trucks in losses is not possible in the longer term.” “At present a 20 per cent hike in freight rates is a must for sustaining business,” he said. He said that hike in fuel prices always has a cascading effect right from top to bottom and in the wake of a daily price hike, it is becoming increasingly difficult for operators to recover running costs. “Losses are mounting as diesel prices have rose sharply, which has already impacted the operating costs by about 20-25 per cent,” Singh said. The Last revision in diesel prices was carried out on July 17 when the prices were increased by 7 piase. Oil companies revised upward diesel prices for 23 consecutive days between June 7 and 29, pushing up the prices by Rs 11.79 per litre. “Transporters demand roll back of fuel price hike reasonably and rationalisation of taxes on fuel. The Central Government should reduce excise duty while the state government should reduce VAT,” he said. Singh also demanded uniform rates for diesel across the country by bringing diesel under the GST and also said that the price revision should be carried out on a monthly or quarterly basis. At present, rates differ from state to state depending on the incidence of value-added tax (VAT). Besides diesel and tolls expenses, maintenance, spares, tyres, oil and manpower are the other cost components in truck operations. “These costs along with driver and labour shortage are also resulting in higher cost of operations and needs to be factored in as well. Once the demand picks up, the freight rates will shoot up much higher,” Singh said. Stating that there has been a “consistent increase” in petrol and diesel prices in the country, he said “the government must provide relief to the trucking sector so that the pressure on the transportation costs is contained and it does not have an impact on viability of operations or prices of the commodities.”
India may remain invested in Farzad-B without development right
India’s quest for building its energy security may see it continue to pursue investment opportunity in Farzad-B gas field in Iran even though ONGC Videsh Ltd (OVL) may not get to develop the block that it discovered over a decade ago. Highly placed sources in the oil ministry said that Indian consortium including Indian Oil, Oil India and OVL, which bagged the exploration contract for Farzad-B in 2002, may remain invested in the upstream project as equity partners with other local and international entities even without operatorship or development rights. This, they said, will allow the consortium to get their share of gas to India at applicable rates decided by Iran. Though the exploration contract signed by the Indian consortium expired in 2009, official sources said that a deal could be negotiated so that India has a presence in the field as equity investors. Farzad-B, which was discovered by OVL in the Farsi block about 10 years ago, had in-place gas reserve of 21.7 trillion cubic feet, of which 12.5 Tcf is believed to be recoverable. If India gets a share of this gas, it could reduce its dependence on expensive LNG. Iran has been dilly dallying over grant of development right of Farzad B for few years now. Things have come to a standstill since US sanctions on Iran in 2018 with India also moving slowly on the matter. Sources said that changes in geo political scenario in the COVID-19 world, which suggests that Iran is coming closer to China while proximity of India is growing towards US, may further spoil the deal to develop the field. In fact, information coming out from Iran now suggests that the country may offer it to a local entity rather than OVL. If Iran decides to offer equity holding in the project, Indian consortium’s claims would once again be considered. “There are two issues to Farzad-B project. Iran may not be giving development rights to OVL but an Indian consortium continues to have part ownership of the block and would get its share of profit whosoever develops the project,” the source quoted earlier said. OVL-led consortium have invested close to $100 million in the project.
COVID-19 world: Iran may deny Farzad-B gas field rights to OVL
In a big setback for India’s ambitions to build its energy security by acquiring oil and gas blocks abroad, Iran is set to deny ONGC Videsh Ltd (OVL) exploration and production rights for the prestigious Farzad B gas field. Highly placed sources in the oil ministry said that Iran may not offer the Indian company to develop the gas field but so far it has not officially communicated its decision. Farzad-B, which was discovered by OVL in the Farsi block about 10 years ago, had in-place gas reserves of 21.7 trillion cubic feet, of which 12.5 Tcf is believed to be recoverable. If India gets a share of this gas, it could reduce its dependence on expensive LNG. Iran has been dilly dallying over the grant of the development right of Farzad B for a few years now. Things have come to a standstill since the US sanctions in 2018 on Iran with India also moving slowly in the matter. This would be a double blow for Indian investment in Iran as reports suggest that an Indian company may not be allowed to develop a rail line that was part of the Chabahar port second phase project. India has done the first phase work at the port. “There are two issues to Farzad B project. Iran may not be giving development tights to OVL but an Indian consortium continues to have part ownership of the block and would get its share of profit whosoever develops the project,” the source quoted earlier said. The OVL-led consortium, which also includes Oil India Ltd and Indian Oil Corp (IOC), have invested close to $100 million in the project. Farzad-B was discovered by OVL in the Farsi block about 10 years ago. India and Iran were initially targeting concluding a deal on Farzad-B field development by November 2016 but later mutually agreed to push the timeline to February 2017. The deadline to wrap up negotiations was later targeted for September 2017. But the deal was stuck over the pricing of the gas. Sanctions delayed the process thereafter and despite visits of ministers from both sides no agreement could be reached. OVL pushed for the deal with a sweetened offer that included investment of close to $11 billion. But that also did not break the ice and the project remains in limbo.
Mozambique gas project of OVL, OIL ties up $14.9 billion debt
ONGC Videsh Ltd (OVL), the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), holds 16 per cent stake in Area-1, while Bharat Petroleum Corp Ltd (BPCL) has 10 per cent. Oil India Ltd has 4 per cent interest. Indian state-owned energy firms OVL and OIL and their foreign partners have secured USD 14.9 billion debt to part-finance their USD 24.1 billion liquefied natural gas (LNG) project in Mozambique. Led by French energy giant Total, the project envisages producing 12.88 million tonnes per annum of LNG from gas discovered in Area-1, offshore Mozambique. Oil India Ltd, a national oil company of India, announces that Rovuma Offshore Area 1 consortium (Area-1), led by Total confirms, the finalization of the Mozambique LNG senior debt financing of USD 14.9 billion for the two train LNG project on July 15, 2020,” the company said in a regulatory filing on Thursday. Indian firms hold a total of 30 per cent stake in Area-1, which has around 75 trillion cubic feet of recoverable gas resource. The consortium operating Area-1 had approved the final investment decision (FID) on June 18, 2019, Oil India Ltd (OIL) said. The total cost is estimated at USD 24.1 billion and is to be funded through a combination of debt (USD 15.8 billion), equity (USD 7.4 billion) and cash flow from operations (USD 0.8 billion). The senior debt financing comprises a loan facility with the African Development Bank, loans from commercial banks and credit from other financing institutions, OIL said, adding the project expects to achieve financial closure in the fourth quarter of this year. The project entails designing, building and operating an integrated Liquefied Natural Gas (LNG) plant, including offshore extraction, underwater pipeline, onshore processing plant, as well as ancillary support facilities. It will have a capacity of 12.88 million tonnes per annum of LNG and will source gas from the Golfinho-Atum (GA) field within Area-1, which is located 40kms off the coast of Mozambique. The project will supply gas for LNG exports (mainly to Europe and Asia) and domestic consumption.
Dharmendra Pradhan invites US oil, gas firms to invest in India; eyes this much investment in 5 years
Petroleum Minister Dharmendra Pradhan invited the US companies and investors to engage and invest in India, ahead of the second ministerial meeting of India and the US Strategic Energy Partnership scheduled tomorrow. Dharmendra Pradhan said that India will see an investment of over $118 billion in the oil and gas sector in the next five years. He added that India is preparing to meet the needs of a fast-growing economy, hence the country is striving for setting up oil and gas exploration facilities and natural gas infrastructure, including the development of gas supply and distribution networks across the country. The minister underlined that there have been a few collaborative efforts between Indian and American companies in this sector, but it is far below their potential. He also said that the resilience of the US-India Energy Partnership is one of the most durable pillars on which the bilateral relations of both countries rest. In an interaction organised by the US-India Business Council (USIBC), Dharmendra Pradhan added that even during these challenging times, India and the US have been working in close collaboration, be it in stabilising global energy markets or in collaborative efforts to address the coronavirus pandemic.
Tamil Nadu: Villagers protest laying of LPG pipelines via fields
Villagers of Kulayankarisal and Pottalkadu, on Thursday, staged a protest to oppose the laying of LPG pipelines through agricultural fields in their villages. The protest was to grab the attention of the district administration and demand that the pipelines be laid in an alternative route. According to sources, the Indian Oil Corporation Limited (IOCL) is laying pipelines in a stretch of 142 km from Ramanathapuram to a private fertilizer plant in Tuticorin. Sources said that the work has been completed for about 134 km that include 53 revenue villages. As the works reached Kulayankarisal and Pottalkadu, the villagers feared it would pose a threat to their lives and farming. On Thursday, the villagers, led by Selvasekar, gathered at a common place in the village and began the protest. Selvasekar said that adequate land is available to lay the pipes through alternative routes. Police personnel were deployed in large numbers as tension gripped the place and the protest continued till late in the evening. Though revenue officials including Tuticorin sub-collector Simranjeet Singh Kahlon and the superintendent of police for Tuticorin district S Jayakumar tried to convince the protesters, they insisted on continuing the protest.