NMC’s bio-CNG project gets funding nod from centre
The central and state governments have released funds of Rs 48.10 crore for the Nagpur Municipal Corporation’s (NMC) three projects — bio-CNG, compost and material recovery facility (MRF) — proposed for garbage treatment and reuse. Funds have been approved under the Swachh Bharat Mission. The state urban development department on Tuesday issued a notification about releasing the funds. “Nagpur’s Solid Waste Management Plan was approved under the Swachh Bharat Mission. The Centre had released funds of Rs28.86 crore as its share to the state. The state’s share is Rs19.24 crore. Thus, a total amount of Rs48.10 crore has been released,” the notification stated. The NMC had sought Rs 267 crore under the Swachh Bharat Mission in 2016-17. The government had approved Rs 96.22 crore of which Rs 70 crore for waste-to-energy project and remaining funds of Rs 26.22 crore for procurement of road sweeping machine and other machineries for improving garbage collection and transportation. The government had released Rs 48.11 crore two years ago. The NMC had planned to drop waste-to-energy project due to failure of private operators to execute the project. The civic body has proposed to treat and reuse entire garbage by developing bio-CNG, compost and MRF centre at Bhandewadi dumping yard. Accordingly, the NMC requested the government to approve these three projects and also increase financial grant from Rs 96.22 crore to Rs 155 crore. The state’s high-powered committee had approved the NMC’s proposal in September 2018. Now, the grant of Rs 48.10 crore has been released. A few days ago, the NMC’s general body approved development of three new projects. Now, the NMC can begin tendering process and execute the projects. The NMC’s plan is to dispose of total garbage generated from the city in a scientific manner.
Why has Qatar refused to renegotiate prices of LNG contracts with India?
Qatar is not willing to renegotiate prices under its long-term liquefied natural gas (LNG) contracts with India. Why is this so? Will PM Modi use alternative channels to renegotiate the prices? In a latest development, Qatar is not willing to renegotiate prices under its long-term liquefied natural gas (LNG) contracts with India, the Middle Eastern nation’s energy minister said on Monday. Sources in Islamabad told GVS that India used all channels to convince the state of Qatar but remained unable to do so. Qatar is, however, willing to supply more volumes of LNG to India, said Saad Sherida al-Kaabi, who is in India to meet his counterpart, at an event in New Delhi. Kaabi, who is also the chief executive of Qatar Petroleum, was accompanied by the chief executive of Qatar Gas, Sheikh Khalid bin Khalifa Al Thani. “We don’t renegotiate existing contracts. Contracts are contracts for the duration we sign them for. We as businesses understand that the sanctity of contract is important for both sides. And for the credibility of both sides, both parties must respect that,” he said. “We are looking forward to adding more volumes in India and negotiating additional volumes.” Delivered spot prices to Indian ports are about half of those under the long-term LNG deals, reducing the appeal of the Qatar supply contracts for price sensitive Indian consumers. Prime Minister Narendra Modi has said India needs to increase the share of natural gas in its energy mix to 15% by 2030 from 6.5% now. India has in the past used its status as Asia’s third-largest LNG buyer to renegotiate deals with Qatar, Australia, and Russia. In 2015, it renegotiated the price of the long-term deal to import 7.5 million tonnes per year of LNG from Qatar, helping it save Rs 80 billion. At that time, Qatar agreed to price LNG at a three-month average Brent oil price instead of the previous practice of pricing it at a 60-month average of Japanese Crude Cocktail (JCC) in exchange for India buying an additional 1 million tonnes per annum of LNG. Both the contracts end in 2028.
Oil Min pitches for inclusion of natural gas in GST
Ahead of the Union Budget, the Oil Ministry has made a renewed pitch for inclusion of natural gas in the ambit of GST to promote the use of the environment-friendly fuel by reducing multiplicity of taxes and improving business climate. When the Goods and Services Tax (GST) was introduced on July 1, 2017, amalgamating 17 central and state levies, five commodities namely crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) were kept out of its purview given the revenue dependence of state governments on this sector. “Currently natural gas is taxed under the VAT regime with VAT ranging from 3 per cent to 20 per cent across states,” the ministry said in a booklet it brought out to promote the use of the fuel in automobiles, household kitchens, and industries. If brought under GST, natural gas will attract a uniform rate of tax at the consumption point anywhere in the country after doing away with current rates of excise duty and VAT. This, it said, would “result in an increase in state domestic product and socio-economic development owing to increased economic activities” which will lead to improved employment opportunities. Also, it would lead to improved investor confidence and attract more investment in natural gas infrastructure in the country, the booklet said, adding that a positive impact on environment and health due to reduction in carbon emissions across major cities was another advantage. “As gas is not under the ambit of GST, there is no input tax credit available. Further, the downstream industries are not able to claim the benefit of the tax credit of VAT paid on purchases of natural gas which is available for alternate fuels/feedstocks,” the booklet said. Oil Minister Dharmendra Pradhan too has been making a vehement pitch for the inclusion of gas in the GST. “We believe natural gas as also aviation turbine fuel (ATF) can be included in the GST regime,” he had said on Monday. Including ATF and natural gas will not just help companies set off tax that they paid on input but will also bring about uniformity in taxation on the fuels in the country, he had said. “Including natural gas in GST is said to be one of the biggest drivers of not just consumption but will also incentivize producers to spend more on finding and producing more gas as well as incentivize importers to bring in more LNG.” Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for 2020-21 fiscal on February 1. ATF makes up for almost a third of the cost of an airline and rates vary from state to state depending on local VAT. A uniform GST would also push the usage of environment-friendly natural gas, whose share in the energy basket the government wants to increase to 15 per cent by 2030 from current 6.2 per cent. Pradhan said the GST Council, the highest decision-making body of the new indirect tax regime, should take a decision in favour of these two fuels at the earliest. The Council is headed by Union Finance Minister and comprises representatives of all states and union territories. Under the existing structure, both natural gas and ATF attract the Centre’s excise duty and a state’s value-added tax (VAT). Both these and all other levies will get subsumed under GST if they are brought under its ambit. The decision on their inclusion depends on the financial position of states as revenues from these five petroleum products constitute a substantial chunk of state government finances. Barring a few, most of the states are incurring revenue shortfall as GST subsumed a dozen of their taxes, introducing the single levy, in a bid to simplify taxation system and remove the cascading effect of ‘tax on tax’ in the country. According to the industry, keeping ATF and natural gas out of the GST net is increasing the cost of these products as tax on inputs is not being credited against the sale of these products, which ultimately, adds to the cost of production. The Aviation Ministry has time and again sought inclusion of ATF under GST as any surge in international oil rates gets reflected in domestic jet fuel prices, leading to costlier air tickets. Natural gas is widely used as industrial input by a variety of industries – from power to steel – and it coming under GST would help eliminate the cascading impact of taxes, bringing down prices of CNG and piped natural gas.
India offers Qatar stake in gas-fired power plants
India has offered Qatar stake in gas-fired power plants in return for long-term offtake assurance for its LNG (liquefied natural gas) shipments and sought renegotiation of the existing supply contract to reduce prices in tune with global trend. This will be the second time India will renegotiate the 25-year contract that Petronet LNG, a company promoted by staterun oil companies, has with Qatar’s RasGas for importing 8.5 million tonnes of gas annually. The two sides had renegotiated the contract in 2015 when global gas prices fell as oil prices crashed in an oversupplied market, but India had to commit buying an additional million tonne of gas per year in return. According to an ICICI Securities report, spot LNG has slid 48 per cent from a year-ago period to $4.9 per unit (million British thermal unit) due to a sharp rise in shipments from US adding to the glut amid tepid demand. This has made the current pricing structure in the Qatar LNG deal untenable for India as it does not reflect the changing gas market dynamics, oil minister Dharmendra Pradhan told his visiting Qatari counterpart Saad Sherida Al-Kaabi on Monday. As sweetener, Pradhan proposed Qatari companies acquire stake in India’s gas-fired power plants with a total capacity of 25,000 MW (mega watt). These plants are languishing since 2012 when output from Reliance Industries Ltd’s KG-D6 field fell unexpectedly and using costlier LNG as fuel made power unaffordable for consumers. Pradhan’s proposal is a winwin for both. A further reduction in LNG price by Qatar will revive these plants by making gas-fuelled power affordable. This will add to demand, while holdings of Qatari companies in the power plants will provide a captive market for Qatar’s LNG shipments in the growing Indian gas market — the underlying theme of a presentation made jointly by IndianOil and GAIL to the Qatari delegation. Rising US oil and gas production has shifted the flow towards Asia, with China and India driving demand and increasing American imports. For Qatar, it is important to retain market share in a market such as India.
Asian LNG prices touch more than 10-year low
Asian spot prices for liquefied natural gas (LNG) plummeted to multi-year lows this week, pressured by a lack of demand to consume abundant supplies. As milder-than-usual winter in both Asia and Europe is curbing demand, there were deals done below $4.00 per million British thermal units (mmBtu) this week, the lowest level in more than 10 years. The average LNG price for March delivery into northeast Asia was estimated at around $4.00 per mmBtu, down $0.60 per mmBtu from the previous week, several sources said. “Warm winter is a clear reason for such a low price,” an LNG trader said. The Brunei LNG export plant sold a cargo for March 30-31 delivery at about $3.90 to $3.95 per mmBtu earlier in the week. Commodity trader Vitol sold a cargo to BP on Friday for March 22-26 delivery at $3.95 per mmBtu in the S&P Global Platts Market on Close window. The deal prices are at their lowest level in Asia since summer 2009, according to data from S&P Global Platts that assesses the Japan-Korea-Marker (JKM) price. With the first half of March holding a slight premium to late March, the average price for that month is at the lowest level since April 2016, according to the same data. Demand is expected to remain low in Asia next week, with Chinese buyers largely out of the market due to the Chinese New Year and Spring Festival holidays. HEAVY SUPPLY With the global gas market heavily oversupplied, new cargo offers further saturated the market. Several sellers issued multi-cargo tenders this week, with a number of one-cargo offers on the market as well. Russia’s Gazprom has offered 18 cargoes for loading at Belgium’s Zeebrugge terminal between the second half of Feb. 2020 and Dec. 31 2021. The offer is for cargoes that Gazprom Marketing and Trading buys from Russia’s Yamal LNG, market sources said. Initially, the 2.9 million tonnes per year volumes agreed in the deal were expected to be supplied by Gazprom to the Asia-Pacific markets, mostly to India, according to the company’s statement from 2015. Japan’s Osaka Gas has offered two cargoes for delivery to Europe in July and November from the Freeport LNG project in the United States as demand in Japan is subdued due to mild weather this winter. Another offer came from Indonesia’s Bontang plant for three cargoes loading between February and April. INDIAN DEMAND PICKS UP Indian buyers, whose purchasing power depends on price levels, have flooded the market seeking cargoes, market sources said. But this was not enough to reduce global oversupply. “At such low prices, demand has risen,” one of the buyers in the country said. Gujarat State Petroleum Corp (GSPC) issued several tenders seeking cargoes for February and March as well as between April and October, market sources said. Gail India was looking for a February cargo into India and also offered a cargo from its Cove Point offtake in the United States.
U.S.: Cameron LNG seeks more time to build 2nd phase at Louisiana export plant
Cameron LNG asked U.S. energy regulators for a 72-month extension until May 2026 to build the second phase of the joint venture’s Cameron liquefied natural gas (LNG) export plant in Louisiana. The company said in a filing with the U.S. Federal Energy Regulatory Commission on Friday that it anticipates making a final investment decision (FID) by mid 2021 to add two additional liquefaction trains. Cameron LNG said construction of the new trains would likely take up to 58 months. One train is already operating at the plant and the company has said it expects trains 2 and 3 to enter commercial service in the first and third quarters of 2020, respectively. The company has said the first phase of the project cost about $10 billion. All of the trains at Cameron are designed to export about 5.0 million tonnes per annum (MTPA), or 0.66 billion cubic feet per day (bcfd), according to the FERC filing. One billion cubic feet is enough gas for about five million U.S. homes. Just looking at terminals under construction, U.S. LNG export capacity is expected to jump to 10.0 bcfd by the end of 2020 and 10.7 bcfd in 2021 from 7.8 bcfd now. That keeps the United States on track to become the biggest LNG exporter in the world by 2024, up from number three in 2019 behind Australia and Qatar. FERC approved construction of Cameron 4 and 5 in May 2016 in an order that required Cameron LNG to put the units in service within four years by May 2020. Cameron said it has already spent about $50 million related to the Cameron expansion project, including development costs. The company said it was not able to start work on Cameron 4 and 5 in part due to a change circumstances of one of its joint venture partners. In 2016, one of the former partners said it did not wish to invest additional capital into the expansion project. Cameron LNG did not name the partner but said in the filing that Total SA acquired Engie SA’s interest in the venture in July 2018. Cameron is owned by affiliates of Sempra Energy, Total, Mitsui & Co Ltd and Japan LNG Investment LLC, a company jointly owned by Mitsubishi Corp and Nippon Yusen Kabushiki Kaisha (NYK). Sempra indirectly owns 50.2 per cent of Cameron. McDermott International Inc and Chiyoda Corp are the lead contractors at Cameron.
Azerbaijan’s trade turnover with India reaches $1.1bn
The trade turnover between Azerbaijan and India increased to approximately $1.1 billion in 2019, Deputy Foreign Minister Ramiz Hasanov said during the event in Baku to mark the 71st Republic Day of India, Azernews reported. “The development of economic relations between our countries should be emphasized. The bilateral intergovernmental commission is operating successfully and the trade turnover between the two countries has increased to approximately 1.1 billion in 2019,” Hasanov said. There are over 230 Indian companies operating in Azerbaijan, which invested $1.2 billion invested in the country’s economy. “Two countries are participating in the North-South International Transport Corridor project through which goods may be supplied to Europe in a shorter period of time and at lower prices than via traditional routes,” Hasanov said. Noting that relations in the energy sector are also developing rapidly, the minister noted that the Indian ONGC Videsh company owns a stake in the project of development of the Azeri-Chirag-Gunashli block of oil and gas fields in the Azerbaijani sector of the Caspian Sea. He further emphasized the importance of tourism in terms of developing relations between the two countries, adding that certain steps have already been taken in this direction. Touching upon cultural ties, Hasanov stressed that as a result of mutually beneficial cooperation between Azerbaijan and India, today Azerbaijani culture is widely promoted in India. Addressing the event, Indian Ambassador to Azerbaijan Bawitlung Vanlalvawna spoke about India’s successes in various fields, as well as the relations with Azerbaijan. He said India was one of the first countries to establish diplomatic relations with Azerbaijan after the country regained its independence.
TAPI pipeline project faces more delays in Afghanistan
Kabul, The Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project has faced another delay in Afghanistan over a postponement in land acquisition, among other issues, according to local authorities. The Ministry of Mines and Petroleum said on Monday that some required letters have not been signed, TOLO News said in a report. And according to the Natural Resources Monitoring Network, construction on the project will be delayed for another six months. “There is a need for the approval of the law (on land acquisition) but there are delays because the MPs are busy in (discussing) former decrees by the President. I think it will take six months to pass this phase,” said Ibrahim Jafarai, a member of the Natural Resources Monitoring Network. Work on the $8 billion pipeline project began in Afghanistan in February 2018. At least 816 km of the total 1,814-km-long pipeline will pass through the provinces of Herat, Farah, Nimroz, Helmand and Kandahar in Afghanistan. The final destination of the pipeline will be the Indian town of Fazilka, near the border with Pakistan. When the project’s agreement was signed in 2015, the work on Afghanistan’s part was scheduled for 2017, the TOLO News report said. Last year, the Ministry of Mines and Petroleum said work on the project will begin at the beginning of 2020. Meanwhile, critics have said that more government focus was required on projects like TAPI and should be prioritized, because of their major impact on the Afghanistan’s economy. Afghanistan is expected to earn more than $400 million in transit duties annually from the project. The country will annually receive 500 million cubic metres of gas from the project in the first 10 years. The amount will increase to one billion cubic meters of gas for the next 10 years and 1.5 billion cubic metres of gas in the third 10 years after the completion of the project.
UK GAS-Prices rise on cold weather demand, LNG supply drop
British wholesale gas prices rose early on Tuesday, supported by colder weather and lower liquefied natural gas (LNG) supply. The within-day contract rose 0.45p to 28.25 p/therm by 0920 GMT. The day-ahead contract traded flat to its Monday level at 28.00 p/therm. The UK gas system was 22.4 million cubic metres (mcm) undersupplied, with demand forecast at 312.4 mcm and supply at 290 mcm/day, National Grid data showed. Undersupply is due to a rise in gas demand for heating following colder weather. Residential gas demand was expected to be at 248 mcm on Tuesday, 25 mcm higher than previously expected, Refinitiv data showed. Average UK temperatures were forecast to drop to 3.7 degrees Celsius on Tuesday, which is 1.9 C degrees lower than expected earlier, the same data showed. Residential consumption is predicted to reduce on Wednesday, however, as temperatures are forecast to rise to 4.6 C Celsius, which has put pressure on the day-ahead price. But warm weather will not last as long as previously expected, Refinitiv analysts said in a morning note. “Temperatures should drop below seasonal normal again from the mid of next week,” they said. Gas-for-power demand is seen reducing throughout this week. Peak wind generation is forecast at over 12 Gigawatts (GW) on Tuesday and Wednesday, Elexon data showed. Total wind generation capacity in Britain is 15.3 GW. On the supply side, flows from Norway rose to 94 mcm on Tuesday from 87 mcm on Monday, Gassco data showed. Flows from the UK Continental Shelf were 2 mcm higher than in the previous day. LNG sendout was at 72 mcm on Tuesday, which is a big drop from last week’s level of over 120 mcm/day. Five tankers are expected in Britain in February so far. The February contract was up 0.30p at 27.70p/therm. The day-ahead gas price at the Dutch TTF hub was up 0.17 euro at 10.65 euros per megawatt hour. The benchmark Dec-20 EU carbon contract was flat at 24.59 euros per tonne.
Reliance’s partnership with Saudi Aramco not a retreat from energy business: Report
Reliance Industries’ partnership with Saudi Aramco for its USD 75 billion oil-to-chemicals business signals expansion rather than retreat as growth opportunities are expected to boost the petrochemical and refining vertical, market analyst firm Bernstein said. Billionaire Mukesh Ambani had in August last year announced initial agreements to sell a 20 per cent stake in the oil-to-chemical business to the Saudi national oil company. Also, a 49 per cent interest in fuel retailing business was sold to UK’s BP plc for Rs 7,000 crore. “Reliance has pivoted away from energy to the new economy. But energy still accounts for 64 per cent of EBITDA. While RIL has divested stakes to BP and Aramco, we expect RIL to grow their petrochemical and refining business given the secular growth opportunities,” it said in a report. Stating that India has significant secular expansion (that is, unaffected by short-term trends) ahead in refined products and petrochemicals, it said with the lowest demand per capita of 1.3 barrels per person, demand for refined products will grow by 5 million barrels per day over the next two decades, more than any other major market. Ethylene demand could grow ten-fold from 5kg per person per annum to 50-60kg pp/pa as consumer demand rises. “Reliance partnership with Aramco and BP signals expansion ahead rather than retreat,” Bernstein said. “Aramco’s investment is to secure market access and growth. While refining is a cash cow for the business, we believe that there are significant opportunities for petrochemical expansion ahead given demand growth and synergies with refining.” Fuels marketing will be significantly expanded given the partnership with BP and plans for 5,500 stations, it said. Ambani had in August last year announced that the deal with Aramco will close by March 2020 but it is now expected to close within the current calendar year. Refining and petrochemicals are a cash cow for Reliance. “But to think of this as an ex-growth part of the business would be a mistake. In India, there is strong secular demand growth ahead. India is estimated to be the fastest growing refined fuels market over the next 20 years (faster than China) and will also one of the fastest growing markets for petrochemicals given the per capita demand which will grow with the GDP,” it said. As part of the August deal, Saudi Aramco will supply 500,000 barrels per day of crude on a long-term basis to RIL’s Jamnagar refinery complex (40 per cent of the refining capacity). “While bears will argue that Reliance is stepping away from energy to digital, we see this deal as an opportunity to expand the downstream business in India with a solid partnership. For Aramco, the deal provides direct access to what is widely expected to be the fastest growing refined oil product market over the next 20 years,” it said. “For Reliance, it provides cash to fund expansion of their digital business and further expansion of downstream capacity with an experienced partner.” Bernstein also said in the short term it remains cautious on chemical margins, but more positive on refining. On RIL’s oil and gas exploration and production business, it said output will start to recover from this year with new developments. “Reliance and partners are developing 3 trillion cubic feet of reserves in the KG-D6 block which can add gross production of 1 billion cubic feet per day and raise segment EBITDA back to Rs 120 billion,” it said. The turnaround is based on three new projects which Reliance and partner BP has launched in the KG basin. Notably the R-Series, Satellites and MU development which together contain 3 trillion cubic feet (TCF) of reserves which will underpin a recovery in production. But the refining segment remains one of the most important contributors to earnings for Reliance. The single largest asset within Reliance’s refining and petrochemical business is the Jamnagar complex, which is one of the world’s largest refining hubs. The Jamnagar complex was built in 2000 with a capacity of 0.67 million barrels per day. After upgrades in 2008, Jamnagar’s crude processing capacity has more than doubled to 1.24 million bpd. Not only is Jamnagar the largest refinery hub in the world, it is also one of the most complex refineries globally, allowing RIL to process discounted heavier crude oil into oil products. “In comparison to global oil majors, Reliance has relatively less refining capacity at 1.24 million bpd versus peers at 2.62 million bpd. However, Reliance has one of the best positions to grow its capacity over time given India’s structural growth in oil demand over the next 20 years,” it said. “Moreover, Reliance has one of the most profitable refining business relative to peers owing to the higher complexity of Jamnagar. Whether Reliance will choose to expand its existing footprint is not clear, but the relationship with Aramco (assuming the deal goes through) means that there could be options for further expansion.” In fuels marketing, Reliance has also formed a new JV with BP last year to create a world-class fuel retailing network in India. Over the next 20 years, India is likely to be the fastest growing fuels market. The new JV company will assume ownership of RIL’s existing fuel retail network and aviation fuel business. Under the new partnership, RIL will hold 51 per cent of the new JV company and BP will hold the remaining 49 per cent. The JV has plans to rapidly grow the fuel retail distribution network in India over the next 5 years. RIL currently has 1,400 sites across India including contribution of USD 1.9 billion per annum in revenue from owned petro retail outlets. The JV plans to expand this to 5,500 sites over the next 5 years, which represents 800 additional sites per year. “For BP, the JV gives them access to the fastest growing refined fuels market. It also allows BP to tap into convenience non-fuel retail in India which is growing rapidly. For Reliance, the transaction provides funding and enables them to tap into