What is the Saudi-UAE project in India whose cost has escalated?
A refinery project in India, set to be jointly built by Saudi Aramco and Abu Dhabi National Oil Company (ADNOC), reportedly faces an estimated cost escalation to $70 billion from the previous $44 billion. Now $70 million project in Maharashtra will produce 1.2 million barrels/day. A refinery project in India, set to be jointly built by Saudi Aramco and Abu Dhabi National Oil Company (ADNOC), reportedly faces an estimated cost escalation to $70 billion from the previous $44 billion. This has emerged from a Reuters news report that, in turn, cites a report by WAM, UAE’s state-run news agency, that a joint economic council of UAE and Saudi officials reviewed their plans for the project on the sidelines of Crown Prince Mohammed bin Salman’s UAE visit. The project Originally, the refinery was supposed to be built in a village in Maharashtra’s Ratnagiri district but the location was later changed to a site in Raigad district, about 100 km from Mumbai. In August, Mukesh Ambani-led Reliance Industries announced that it will be selling a 20 percent stake in its oil and chemical business to Saudi Aramco. Repeated delays in land acquisition have led to the expected year of completion being postponed to 2025. In September, drone attacks on two of the oil facilities managed by Saudi Aramco by Houthi rebels from Yemen had impacted Saudi Arabia’s oil exports and production and the global oil market in turn. The promoters Saudi Aramco is Saudi Arabia’s state-owned oil company and manages the wealth the country generates from petroleum. Heavily influenced by the Al Saud royal family, Saudi Aramco is controlled by the Supreme Council for Saudi Aramco (SCSA) led by Crown Prince Mohammed bin Salman. ADNOC, based in Abu Dhabi, is the state-owned oil company of the UAE. While Saudi Arabia holds the largest oil reserves in the world, ADNOC is believed to hold the seventh-largest. The agreement In June last year, Aramco and ADNOC signed a framework agreement to jointly develop what was originally called the Ratnagiri Refinery and Petrochemicals Limited (RRPCL), a refinery that would produce 1.2 million barrels per day. The two state-owned companies are responsible for building, owning and operating the refinery in collaboration with Indian oil companies such as the Indian Oil Corporation Limited, Bharat Petroleum and Hindustan Petroleum. While Aramco and ADNOC will own a 50 per cent share in the company, the remaining will be owned by the Indian consortium. A statement issued by Saudi Aramco after the signing of the framework with ADNOC in 2018 said, “The partnership between Saudi Aramco and ADNOC marks a significant step in regional energy partnership and cooperation, bringing together two of the world’s leading National Oil Companies as strategic partners with the Indian consortium.” Saudi Aramco’s president and CEO said the refinery project was being built to ensure that India has “secure, reliable energy feedstocks for its long term prosperity.”
GAIL to supply PNG in Dehradun under city gas distribution project
GAIL Gas Ltd will supply PNG to 3,00,000 households in Dehradun district under the city gas distribution project. Making the announcement here on Friday, GAIL Gas Ltd Managing Director (Marketing) V Gautam said work on laying pipelines for the project will begin in a month. In five to six months, the firm will start supplying piped natural gas to 5,000 households in Chakrata, Dehradun, Doiwala, Kalsi, Rishikesh, Tyuni and Vikasnagar areas of Dehradun district, he added. The target is to cover 3,00,000 households spread over an area of 3,088 square km in the district at a cost of Rs 15 billion in the next eight years. Registeration of PNG consumers under the project will soon get under way, the MD said. As laying pipelines from Haridwar to Dehradun is likely to take some time, PNG will be supplied in the district for the time being through de-compressed units (DCUs) of which 4-5 will be set up in Dehradun, Gautam said. Kerala: Distribution of natural gas to households in Kozhikode soon The infrastructure development work for the distribution of piped natural gas to households in Kozhikode, Malappuram and Wayanad districts is likely to start soon. The plan is to complete the laying of pipelines for household connections and to the bunks of Indian Oil Corporation in some parts of Kozhikode. The work in Kozhikode will commence at Unnikulam and nearby areas in the first phase. The intermediate pigging station of the gas pipeline developed by the Gas Authority of India Ltd (GAIL) at Unnikulam. It will be the base station for the household network and network to CNG bunks. “The infrastructure development and distribution of CNG to houses will be completed by the Indian Oil-Adani Gas Private Ltd,” said M Viju, deputy general manager of GAIL. “The IP Station functioning at Unnikulam and three sectionalizing valve (SV) stations at Puthur, Kottur and Ayanchery in the district will also function as refilling stations and centres of local area distribution,” he said adding that similar works would be carried out in other districts also. IP stations and SV stations are part of the GAIL pipeline for the real-time monitoring of the gas supply. The stations have the facilities to check the pressure of piped gas using software. Two weeks ago, a team of experts from the IO-AG visited Unnikulam, Kunnamangalam and other areas as part of planning their work. IO-AG private limited is entrusted the task of infrastructure development and distribution of piped natural gas to individuals as GAIL cannot give direct supply to household consumers. They are entitled to carry out direct supply only to major customers. The household distribution will be done after reducing the line pressure of the piped gas in accordance with the regulations of Petroleum and Natural Gas Regulatory Board. The area from Unnikulam to Karanthur will be covered by the IO-AG private limited, said MLA PTA Rahim. “They have assured to start work at the earliest to complete the process before June,” he said. The plan is to lay distribution line alongside the national highway 766 from Unnikulam to Karanthur.
Piped Natural Gas supply to start in Mangaluru in 6-8 months
Gail Gas Limited (GGL), which is gearing up to launch piped natural gas (PNG) in the city within 6-8 months, has announced various pocket-friendly payment options. Vilin Zunke, deputy general manager, GGL, said that there will be no registration fee for domestic customers, who want to avail PNG directly to their homes. In the first phase, PNG connections will be made available to residents of Kadri, Bejai, Attavar and Falnir, he said, adding the work of pipeline laying is expected to be completed by March , and all other areas of the city will be covered in the later phases. In the endeavour to promote clean fuel, GGL has started discussions with various industries in Baikampady and Mangaluru SEZ area for providing PNG to their plants, he added.
Govt may revive plan to give statutory powers to DGH
After giving more attractive terms under its new hydrocarbon exploration licensing policy (HELP), the government is now likely revive plans to reform the regulatory framework in the oil and gas sector by arming the office of upstream regulator Directorate General of Hydrocarbons (DGH) with statutory powers. This will be in conjunction to another plan to carve out a specialist wing under the Petroleum Ministry for assisting it in administration of contracts. Though Petroleum Minister Dharmendra Pradhan had earlier ruled out statutory status for DGH, saying the sector has not fully developed and needs government support, a source close to the developments in the ministry said that the plan is being revived again to prevent a clash of interest in DGH’s regulatory operations. Also, the policy environment has undergone several reforms and it is felt that the sector would now grow on its own. DGH is currently not just formulating regulations for exploration and production (E&P) activities under the guidance of the Petroleum Ministry, but is also responsible for administering contracts, even for government-owned companies such as Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL). It also assists the government in auctioning oil and gas exploration fields. According to the revised plan, which is still in discussion stage, the office of the DGH would be distanced from the government and placed in a statutory body that will give the regulatory regime more teeth and functional autonomy. But the government will retain some of the talent from existing DGH to create a special wing on the lines of the Central Electricity Authority and the Telecommunications Engineering Centre. This wing will fill the vacuum created by separation of DGH and help the Petroleum Ministry on technical issues related to administration of contracts for oil and gas blocks. This will require competent resources with the ministry. “World over, regulators function independent of the government so that these is no clash of interest. This is especially true in the case of India, where the government is the majority shareholder in oil and gas companies. The proposed move for separation of regulatory and administrative powers of DGH would usher in a new era for country’s energy sector,” said an energy sector expert not willing to be named. Government think tank Niti Aayog has also favoured strengthening the office of DGH by giving it statutory powers. In fact, in its draft National Energy Policy, which is being finalised soon, it has said that upstream regulatory regime and contract administration need to be separated for an arms-length administration of upstream matters. In 2011, the Ashok Chawla committee had suggested that the DGH be turned into an ‘independent technical office’ attached to the Petroleum Ministry and an upstream regulator be established to focus on regulatory functions. Another panel in 2001 had recommended the setting up of an Upstream Hydrocarbon Regulatory Board, giving DGH a techno-administrative role as a part of the Petroleum Ministry. The 2013 Vijay Kelkar committee had also suggested hiving off conflicting interests of the DGH while numerous parliamentary standing committees to favoured statutory role for the upstream regulator. The proposed regulatory reforms comes on the back of a series of initiatives taken by the Petroleum Ministry in recent months to improve regulations and make the country an attractive destination for investment by global oil and gas giants. The government has already started the process of auction of major fields from July this year under the revamped policy that gives both marketing and pricing freedom for gas production. In addition, blocks are being auctioned under the open acreage policy that gives the bidder the choice of selecting the prospecting area. All this is part of the new Hydrocarbon Exploration and Licensing Policy announced by the government earlier. The DGH was established in 1993 under the administrative control of Ministry of Petroleum & Natural Gas through a government resolution. Its objectives are to promote sound management of oil and natural gas resources with a balanced regard for environment, safety, technological and economic aspects of petroleum activity. DGH has been entrusted with several responsibilities like implementation of New Exploration Licensing Policy (NELP), matters concerning the production sharing contracts (PSCs) for discovered fields and exploration blocks, promotion of investment in E&P sector and monitoring of E&P activities, including review of reservoir performance of producing fields. In addition, the DGH is also engaged in opening up of new unexplored areas for future exploration and development of non-conventional hydrocarbon energy sources like Coal Bed Methane (CBM), as also futuristic hydrocarbon energy resources like Gas Hydrates and Oil Shales.
China’s new Russian natural gas pipeline won’t worry LNG, oversupply will
A new pipeline from Russia that will eventually be capable of delivering more than a quarter of China’s current level of natural gas imports sounds like the last thing embattled liquefied natural gas (LNG) producers need. The Power of Siberia pipeline was scheduled on Monday to start delivering natural gas from Russia to China’s northeast, bringing the cleaner-burning fuel some 3,000 kilometres (1,865 miles) to a region that up to now has been heavily reliant on coal. The pipeline is due to reach its full capacity of 38 billion cubic metres (bcm) a year by 2025, which is equivalent to about 28.1 million tonnes of LNG. China’s total natural gas imports from LNG and existing pipelines from central Asia were 77.1 million tonnes in the first 10 months of 2019, meaning they should be around 93 million tonnes for the full year. This means the new pipeline will be able to boost the current level of imports by around 30%, a substantial figure even when viewed in the light of China’s supercharged natural gas demand growth in recent years. This may look concerning for LNG exporters, who are already battling low prices caused by a supply surplus and slowing growth in China, the fastest-growing major market for the super-chilled fuel and the number two importer behind Japan. But the new pipeline is unlikely to have much of an impact on China’s LNG demand, as it will effectively serve a market not currently reached by LNG imports. The pipeline goes to northeastern Heilongjiang province, which borders Russia, and then it continues to Jilin and Liaoning, China’s top grain hub. While some of these provinces, Liaoning in particular, do have industries, they have mainly been powered by coal up until now, and the region’s industry and 68 million urban residents consume just 14 bcm of natural gas annually. What this means is that the fuel from the Power of Siberia pipeline is likely mainly to displace coal, especially in industry and residential heating during winter. This will fit in with Beijing’s vision of improving air quality across the northern provinces in winter by replacing coal-fired boilers with natural gas. It’s also worth noting that the pipeline is expected to deliver only 4.6 bcm in 2020, equivalent to just 3.4 million tonnes of LNG, rising to 10 bcm in 2021 and the full capacity by 2025. This gives the marketer of the pipeline gas, China National Petroleum Corp, time to build the market in the provinces where the gas is being delivered. LNG DEMAND WORRIES LNG exporters to China should perhaps be more worried by the slowing rate of demand growth in their main existing markets in the coastal provinces, especially the heavily industrialised southeast. While it appears LNG imports bounced back in November from a weak October, it’s likely that full year growth will only just make double digits, down from rates above 40% for the past two years. China imported 6.13 million tonnes in November, according to vessel-tracking and port data compiled by Refinitiv. This was up sharply from October’s 3.94 million tonnes, but still only in line with the 6.17 million imported in November last year. For the first 11 months of the year, Refinitiv data shows China’s LNG imports were 53.2 million tonnes, putting then on track to come in around 60 million for the full year, assuming this December is similar to the same month in 2018. This would be about 13% higher than the 53.1 million tonnes China imported in 2018, which is a strong rate of growth but a rapid cooling in the rate of growth from the previous two years. The problem for major LNG exporters such as Australia, Qatar and the United States is that quite a bit of their demand hopes are built around China continuing to grow rapidly, especially since Japan and number three buyer South Korea are mature markets with limited growth prospects. The surge in supply from new projects in Australia and the United States this year, coupled with slower demand growth in China, has already resulted in the spot price in Asia dropping to its lowest for this time period on record. Spot LNG ended November at $5.60 per million British thermal units (mmBtu), compared with $9.80 at the end of November 2018 and $9.85 at the end of November 2017. The supply surplus has effectively done away with the usual winter price spike in Asia, apart from a brief little blip higher to $6.80 per mmBtu in mid-October. With a surge of new LNG projects being approved, or likely to be approved in the near future, the industry will need to see faster demand growth than is currently happening. The silver lining is that if buyers can be convinced that long-term LNG prices have shifted structurally lower, they may be convinced to take a bet on the fuel.
Sweden offers alternatives to tackle stubble burning
What if all the paddy stubble that is causing Delhi’s air to turn so toxic due to burning is turned to something useful instead? Sweden is showing the way to turn the troublesome stubble into green coal or energy pellets that can be used as fuel instead. On Monday, Prime Minister Narendra Modi and visiting Swedish King Carl XVI Gustaf would through pressing of a button officially launch a pilot project in Mohali, Punjab, to produce green coal with paddy straw, with the collaboration of Swedish firm Bioendev. In January this year, National Agri-Food Biotechnology Institute (NABI), in Mohali, signed a Memorandum fo Understanding (MoU) with Bioendev AB, Sweden, to set up the pilot project. The government of India and Bioendev AB are in a 50-50 collaboration on the project. The Swedish firm, which specialises in turning forest waste into energy pellets, has “fine-tuned” its process to make it suitable for paddy and wheat straw, Swedish Ambassador Klas Molin told IANS. A huge plant has been set up in Mohali to convert paddy straw into the energy pellets, said the envoy. The plant uses the process of torrefaction – a thermal process to convert biomass into a coal-like material. The green coal leaves no carbon footprint. According to Bioendev’s website, energy from 35 million tons paddy is wasted every year in India. It can be converted to bio coal and replace 21 million tons of fossil coal a year. This would work out to 48 million tons of carbon dioxide equivalent reduction, or equivalent to Green House Gas emissions from 10.2 million Indian cars. According to the website, the Bioendev process of turning biomass – in this case stubble — into green coal offers an effective alternative to fossil fuels like coal, and helps to significantly reduce the carbon footprint. Not just green pellets. Sweden has other things on offer to turn paddy stubble into useful alternatives – like table mats, decorative pieces, lamp shades etc. Swedish major Ikea, the world’s largest furniture retailer, has been collecting paddy stubble from farmers in Punjab and working on ways to turn it into attractive home decor. The stubble is mixed with textile material through a process. The end products, in blue and white, would be exhibited on Tuesday at a function in the Habitat centre to be graced by the Swedish Royal couple King Carl XVI Gustaf and Queen Silvia. Ikea has been working with farmers in Punjab for the past two years on this project, said the envoy Molin. The spike in air pollution in Delhi is mainly due to the burning of rice stubble and straw in the fields of Punjab and Haryana after the kharif crop is harvested. In order to plant the rabi crop in October, farmers clear their fields in a hurry, and stubble and straw burning is the fastest and cheapest way to do it, with other options being unaffordable. The smoke from the burning stubble blows into neighboring Delhi, and combined with the pollution from vehicles, causes heavy smog. The Swedish royals are visiting India from December 2-6 at the invitation of President Ram Nath Kovind. They will travel to New Delhi, Mumbai and the state of Uttarakhand.
Is This The Best Place In The World For Energy Investors?
BP’s 2019 energy outlook projects that big things are in store for India’s energy sector. The country’s energy demand is set to balloon by 156 percent by 2040, at which point BP has projected that the subcontinent will account for a whopping 11 percent of global energy consumption–double its current share. BP’s biggest takeaways for India’s role in the future of our global energy landscape are: – India accounts for more than a quarter of net global primary energy demand growth between 2017-2040. – 42 percent of this new energy demand is met through coal, meaning CO2 emissions roughly double by 2040. – Gas production grows but fails to keep pace with demand, implying a significant growth in gas imports. All this goes to say that India needs to be proactive about securing a greater and more diversified energy supply in the face of a demand that is not only going to grow, but is going to grow by a huge margin at a time that clean energy alternatives and cutting carbon emissions have never been more important. So far, however, India has been looking to ramp up their energy sector at all levels, including intensive investment in fossil fuels. Last year India achieved the distinction of being the third-largest importer of crude oil in the world, coming in just behind the United States and China. “Of late, few countries are being as proactive as India when it comes to courting foreign investment in the oil and gas sector,” reports Forbes. “It isn’t hard to guess why, as the Indian economy is largely driven by imported oil to the tune of over 80 percent of its headline requirements.” The report, titled “India Seeks Global Petrodollars To Cope With Burgeoning Energy Demand Through 2035” goes on to expand on this argument with the assertion that “with the consumption of petroleum products expected to grow at a compounded annual growth rate of ~5 percent to 2035, and Prime Minister Narendra Modi’s commitment to reduce energy import requirements below 70 percent of headline demand, the strategy appears to be one of being loud and proud in courting petrodollars.” This strategy was notably on display at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) 2019, where India was well-represented, with Oil Minister Dharmendra Pradhan heading a pavilion housing “nine of the country’s oil and gas companies from the upstream, midstream, downstream and engineering segments, along with Federation of Indian Petroleum Industry (FIPI), India Directorate General of Hydrocarbons (DGH) and Confederation of Indian Industry (CII).” Pradhan used this platform to tell the reporters gathered at the event that “India will be a driver of global energy demand in coming decades. There is no better place to invest if you are in the business of energy. More so, as we are working to make India a more natural gas-based economy.” Later, in his keynote speech, Pradhan went on to say that India will need to secure around $100 billion of foreign investment in its oil and gas sector (including pipelines, gas terminals, and other infrastructure for transport and refining) by 2024. At the same time that it courts petrodollars, however, India is also busy at work developing other energy sectors, both clean and carbon-intensive. This is extremely important on a global scale, as the route India will choose to take and which sectors they continue to invest in hold major implications for the planet as a whole. In a Reuters op-ed titled “China, India are both the problem and solution for coal, climate change,” columnist Clyde Russell writes that “in practical terms, the future of coal is largely in the hands of just two countries, China and India, which currently account for 60.2 percent of global electricity generated by the polluting fuel, according to data from the Institute for Energy Economics and Financial Analysis (IEEFA).” India may be appealing for petro-dollars now, but we can only hope that this is not the nation’s primary energy strategy.
Numaligarh Refinery to venture into exploration and production
Numaligarh Refinery Ltd (NRL) would soon venture into the upstream business of exploration and production, following the nod from Union Ministry of Petroleum and Natural Gas to acquire participatory interest in two blocks in Assam. The Ministry of Petroleum and Gas has formally approved that NRL could acquire participatory interest in the two exploration blocks of Namrup in Dibrugarh district and West Mechaki block in Tinsukia district, an official release said on Thursday. The exploration blocks were earlier awarded to Oil India Limited (OIL) on October 1, 2018 after nationwide bidding under open acreage licensing policy (OALP) round-I. Namrup Block covers an area of 125 sq km and West Mechaki Block covers an area of 489 sq km. OIL would be the operator in both the blocks as the farmout agreements for both the blocks were earlier signed with it. This would be NRL’s first investment in exploration and production. With this development, NRL would have a holistic presence across all sectors of the oil industry–upstream, midstream and downstream, the release added.
Drought trims Australia greenhouse gas emissions, offsets jump from gas trade
Australia’s greenhouse gas emissions were roughly unchanged in the 12 months ended June as a long-running drought hit cattle and sheep farming, shrivelling emissions from agriculture and offsetting sharp increases from the natural gas industry. Overall emissions edged down 0.1 percent to 532.0 million tonnes of carbon dioxide equivalent (Mt CO2-e) in the year to June 30, the Department of Environment and Energy said in a quarterly update. That leaves Australia just under half-way towards its Paris Accord target of cutting emissions by between 26 percent and 28 percent below 2005 levels by 2030. It needs to cut emissions to around 446 Mt CO2-e to meet the goal. Emissions from the farm sector dropped by 4.2 Mt CO2-e, or 5.9 percent, over the year, while emissions from electricity generation fell 2.1 Mt CO2-e, or 1.2 percent, thanks to declining coal consumption and increased wind and solar power. “The 5.9 percent decline in emissions from the agriculture sector reflects the effects of drought which has led to a decline in livestock populations as well as fertiliser use,” the report said. Environment watchers welcomed the overall cap on emissions. “This suffering of our farmers who are destocking in the face of drought, and the hard work of the renewables sector have meant that Australia’s emissions have stalled,” Climate Council researcher Tim Baxter said in a statement. In contrast, the report flagged a 5.9 Mt CO2-e rise in emissions from stationary sources, which includes aluminum smelters, and fugitive emissions, both mostly from the liquefied natural gas (LNG) sector, including flaring and leakage of methane and carbon dioxide among other things. Australia’s rapidly growing LNG export sector, where the biggest undeveloped gas source, Browse off Western Australia, is due to start producing around 2026, poses a challenge for Australia to meet its Paris commitment. “Growth in global demand, together with the changes from globalization, is making Australia’s exports an increasingly important driver of Australia’s emissions profile,” the report said.
Government appoints Deloitte as advisor for BPCL stake sale
The Department of Investment and Public Asset Management has appointed Deloitte Touche Tohmatsu Ltd as advisor for the strategic sale of Bharat Petroleum Corporation, a senior banker associated with the process said. Completion of the stake sale in India’s second-largest state-owned oil refiner by March 2020 could help the government mobilise more than Rs 60,000 crore, or $8.4 billion, and narrow the fiscal deficit. At the closing price of Rs 509.95 on the BSE on Thursday, BPCL’s market cap was Rs 1,10,621 crore, valuing the government’s 53.29% stake at a tad below Rs 59,000 crore. The government approved the strategic disinvestment in BPCL last week, along with transfer of management control, but excluding the stake in Numaligarh Refinery, which will be carved out of BPCL before privatisation. “The transaction is expected to be at a significant premium to the underlying price as the buyer will have to pay the control premium. Besides the fact that the replaceable value of the BPCL’s asset is much more than the current market price, the successful acquirer will also have to give control premium,” the banker said. The government has set a divestment target of Rs 1,05,000 crore for 2019-20. Some global petrochemical giants have expressed interest in the assets of BPCL and are expected to bid, people aware of the matter said. Unlike the sale of Hindustan Petroleum Corporation Ltd. to Oil and Natural Gas Corp. in 2017-18, the acquirer of BPCL will have to offer to buy an additional 25% of the company’s shares from the market.