Oil minister Dharmendra Pradhan lays foundation stone for LPG plant in Hazaribagh
Petroleum and Natural Gas Minister Dharmendra Pradhan on Friday laid the foundation stone for Hindustan Petroleum Corporation Limited LPG gas plant in Hazaribagh, along with fellow Union Minister Arjun Munda and Chief Minister Raghubar Das. “Goodness of natural gas in Jamshedpur. Clean, efficient and safe fuel in the form of #PNG and #CNG will now usher a clean fuel-led development in the steel city,” tweeted Union Minister Dharmendra Pradhan. The LPG bottling plant will have a capacity of 120 TMT (Thousand Metric Ton) and it will be constructed in 26 Acre land in Barhi. The LPG plant at Barhi will meet the demand of LPG in Hazaribagh, Kodarma, Giridih, Chatra, Palamu, Deoghar, Dumka, Godda, Sahibganj, and Pakur. “The plant is being set up at an investment of Rs 161.5 Cr and is scheduled completion date is Sept’21,” read an official release.
Russia’s Sakhalin-2 LNG plant’s expansion put on hold – sources
Plans for the expansion of Russia’s Sakhalin-2 liquefied natural gas (LNG) plant have been put on hold, according to three sources involved in the project, a potential setback to Russia’s ambition to lift its global LNG market share. The main reasons for the hold-up are the lack of gas resources and international sanctions, the sources said, but plans of Russian gas giant Gazprom to boost its pipeline gas supplies to China, have also had an impact. Equity holders in the Sakhalin Energy consortium include Gazprom which controls the project with a majority share, as well as oil major Royal Dutch Shell, Japan’s Mitsui and Mitsubishi Corp. Russia plans to raise its global LNG market share from less than 10% now to 20% by 2035, mainly thanks to cranking up of output by non-state producer Novatek and its partners in the Arctic. Gazprom, Russia’s sole exporter of natural gas via pipelines, has been slower in its LNG plans, focusing on pumping the fuel via pipes instead. Sakhalin-2, off the country’s eastern shores, is Russia’s first LNG producing plant with a capacity of over 10 million tonnes per year. Its two production units, or trains, were launched in 2009 in strategic proximity to Japan, the world’s largest consumer of the sea-borne LNG. The consortium, Sakhalin Energy, has plans to expand and build a third train with a capacity of 5 million tonnes per year. Gazprom had said the expansion could happen in 2021. “There have been no movements on the third line,” a source from within the consortium said. Shareholders have considered several options for the expansion: buying gas from the neighbouring Sakhalin-1 project led by ExxonMobil, developing new resources or a combination. Yet, Sakhalin-1, where the state oil company Rosneft is also a shareholder, is aiming for its own LNG plant. The talks about usage of Sakhalin-1 gas for the Sakhalin-2 LNG plant’s expansion have dragged on for years. Gazprom had initially planned to use resources from the Yuzhno-Kirinskoye field – yet to be commercially drilled and developed – for the Sakhalin-2 expansion. Gazprom and Sakhalin Energy have not responded to requests for comment. Shell in Russia said the company remains committed to the expansion. “The project is very robust from the technical and commercial point of view. However we need to confirm the feed gas supply source,” it said in emailed comments. “Only after such a source is determined, it will be possible to progress the project to FID and further construction.” In 2015, the United States restricted exports, re-exports and transfers of technology and equipment to the Yuzhno-Kirinskoye field, making it harder to develop, in response to Russia’s annexation of Crimea from Ukraine a year earlier. Gazprom has discovered another field, Yuzhno-Lunskoye, but the resources there are not enough for a third train at Sakhalin-2, according to a company source. Next month, Gazprom plans to start landmark gas supplies to China via the Power of Siberia pipeline through which flows are expected to gradually rise to 38 billion cubic metres (bcm) per year during the next five years. Other ways of pipeline gas delivery to China have been under discussion and one of the new possible routes of supplies is the existing Sakhalin – Khabarovsk – Vladivostok pipeline. Russia wants to build a spur from the pipeline to China to the tune of 10 bcm per year but no deal has been clinched with China on that route yet.
Japanese-backed Australian LNG import project faces delay
Plans for a Japanese-backed project to import liquefied natural gas (LNG) to Australia have hit a hurdle as the group struggles to lock in customers, including Australia’s top gas retailer, Origin Energy. Potential buyers are holding off signing contracts after a drop in local gas prices, industry observers and sources said, leaving the A$250 million ($171 million) project well behind its initial schedule of delivering gas in late 2020. The delay risks Australian Industrial Energy’s (AIE) aim of opening a gas terminal in Port Kembla in New South Wales state ahead of a rival project by Australia’s AGL Energy, while both projects are racing to meet a looming gas shortage. AIE, backed by Japan’s JERA, the world’s biggest LNG buyer, trading house Marubeni Corp and Australian mining billionaire Andrew Forrest’s Squadron Energy, is one of five projects aiming to bring gas to southeast Australia. It had hoped its Port Kembla Gas Terminal would start delivering imported gas to industrial users, such as chemicals and brick makers, in late 2020, making it the first off the rank. As of June, the project had lined up the country’s no.3 gas retailer, EnergyAustralia, as its first customer, booked a floating storage and regasification unit and booked contractors to build wharf facilities. However, since then it has failed to lock in deals with 12 industrial users who had expressed interest in 2018. A few of those 12, representing “a very small load”, have since dropped out altogether, Squadron Chief Executive Stuart Johnston told Reuters. Industry observers say manufacturers don’t want to commit to AIE as a global LNG glut has spurred two gas exporters in Queensland – Royal Dutch Shell and APLNG, led by ConocoPhillips – to offer more gas into the local market, driving down prices. “With improved gas availability on the domestic market currently and prices falling, this could delay (AIE’s) process as buyers feel more comfortable continuing to contract for domestic pipeline gas,” said Nicholas Browne, Asia gas and LNG research director at consultants Wood Mackenzie. With manufacturers holding off, AIE is chasing Origin Energy, Australia’s biggest gas retailer, to help get the project off the ground, people familiar with the project said. One person, who declined to be named as talks are confidential, said one sticking point was that Origin was seeking an equity stake in the project. Origin confirmed it has been talking to AIE, among others, about gas supply but played down talk of an equity stake. “We are not actively looking to invest in the project,” an Origin spokeswoman said. Squadron said it would not comment on talks with potential customers. A Marubeni spokesman said AIE was talking to industrial users and energy retailers. JERA, a joint venture of Tokyo Electric Power Co and Chubu Electric Power Co , declined to comment. TIMEFRAME UNCERTAIN AIE’s backers are no longer predicting when it will deliver first gas. “I’m not hanging dates out there at the moment,” Johnston told Reuters. He said the facilities could be delivering gas within 16 months of a final investment decision, and customers were lining up as they expect Port Kembla to be the first to market. The project still needs state approval for greater throughput at the site than it originally applied for. This would meet the needs of retailers like Origin and EnergyAustralia seeking access to more cargoes during the Australian winter, when gas demand from households soars, rather than the steady supply sought year-round by manufacturers. AGL, meanwhile, is grappling with an extended environmental review of its Crib Point import project in Victoria, but still expects to start importing LNG by June 2022. Further delays could see Australia’s southeast short on gas, as the market’s ageing supply source, the Gippsland Basin, is expected to go into a steeper decline from 2023. “This is only three years away, so the longer the projects are delayed, the more security of supply risk the east coast market will be exposed to,” WoodMac’s Browne said.
Two-phased strategic disinvestment for BPCL likely
The government may consider two-phased disinvestment for public sector oil refiner and retailer Bharat Petroleum Corporation Ltd (BPCL), if the initial strategic sale of the entire 53.29 per cent government stake in the company fails to get requisite response. According to official sources, there is fear that no company, including global majors, may commit to invest close to Rs 1 lakh crore required to complete the transanction at one go. Thus, the government may sell half or around 26-27 per cent of its share first and consider complete exit from BPCL at a later stage when the valuation improves after the fund infusion by the strategic investor. The government has tried this model earlier during the strategic disinvestment of metal and mining PSUs — Hindustan Zinc Ltd and BALCO. Then Atal Bihari Vajpayee government had retained minority shareholding in these PSUs after sale and change of management control. “The strategic sale of BSNL would require investors to put in close to Rs 1 lakh crore. While large global oil corporations have the financial muscle to commit such kind of investment, nobody would like to take such a huge risk at a time when oil markets are subdued and there is a gradual shift in energy mix towards renewables and electric mobility,” said a top official of oil PSU on condition of anonymity. The Disinvestment Department (DIPAM) has started the process to appoint advisors for the sale of entire government stake in BPCL. While the mandate of advisors is to come up with fair valuation, identify investors and close the deal, sources said they might also present two scenarios — one where 53.29 per cent stake is sold to a strategic investor, and the other where strategic investor will pick up half of this and take the management control by virtue of having the largest shareholding. In the second scenario, the government will continue with up to 26 per cent holding in BPCL, a portion of which it might dilute when the strategic investor comes up with an open offer. It may also keep a portion for sale at a later stage at higher valuations after the investor pumps in money and lets it grow. The government stake is worth over Rs 60,000 crore at the prevailing price of BPCL shares on the BSE. If the buyer has to further acquire 25 per cent share in an open offer as per the takeover code, the total amount will rise close to Rs 1 lakh crore. This is considered too high even by international standards. On its part, the DIPAM is working out a plan to offload entire government equity to a strategic partner, possibly a large overseas oil entity, like Saudi Aramco, Total, ExxonMobil and Shell. But with the global oil market facing a slump with demand not growing despite supply squeeze, the appetite for a large acquisition becomes difficult. While no Indian company looks like mobilising such huge funds for BPCL buy, industry experts indicated that companies from Russia and the Gulf could be targeted to get the necessary investment. This, sources said, could be done through government to government talks as most oil companies in the region are state-controlled. BPCL could be an attractive buy for firms, ranging from Saudi Aramco to French energy giant Total, which are vying to enter the world’s fastest-growing fuel retail market, where BPCL has significant presence. Alternatively, the government could also keep other oil PSUs, like Indian Oil Corporation (IOC) and OIL India, on a standby to go in for share buybacks in the event strategic sale to a private partner having little success. BPCL operates four refineries at Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity to convert 38.3 million tonnes of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors. The government proposes to raise Rs 1.05 lakh crore from disinvestment in this financial year. It had exceeded asset-sale targets of Rs 1 lakh crore in FY18 and Rs 80,000 crore in FY19.
Indian Oil quarterly profit was lowest in 3 years; Subdued margins and inventory losses continue to weigh
Suppressed product cracks especially on petrol coupled with inventory and forex losses pulled down the second quarter net profit of Indian Oil Corporation (IOC), the country’s largest fuel retailer, to lowest in three years since the second quarter of 2015-16 when it had reported profit of Rs 329 crore. The company’s net profit in the September of the current financial year (2019-2020) declined to Rs 563 crore, as compared to Rs 3,247 crore posted in the corresponding quarter a year ago. The company’s Gross Refinery Margin (GRMs) excluding inventory gain or loss dropped to $3.99 per barrel for the second quarter ended September 2019, as compared to $5.88 per barrel during the corresponding quarter a year ago. IOC Chairman Sanjiv Singh attributed the dismal performance to subdued product cracks. “GRMs also depend upon product cracks, which is the difference between crude and product price. Compared to previous years, gasoline cracks have been very suppressed. Lower product cracks led to lower GRMs,” he said at a media interaction on Thursday. “If you look at the physical performance, our refineries exceeded 100 per cent capacity utilisation. We achieved 59.9 per cent of distillate yield which is in line with the numbers posted last year, we posted 8.8 per cent fuel and loss which is exactly in line with last year. Physical performance-wise, refineries operated perfectly,” he added. The company recorded an inventory loss of Rs 1,807 crore for the second quarter (July-September 2019) as against Rs 2,895 crore of inventory gain in the corresponding quarter a year ago. Also, IOC posted Rs 1,135 crore loss on foreign exchange, lower as compared to a loss of Rs 2,620 posted in the corresponding quarter a year ago. In addition, maintenance and refinery-upgrade activities in a run-up to change in fuel specifications to BS VI have impacted the company’s crude throughput. The refiner’s throughput in the second quarter of the current financial year declined 2 per cent to 17.53 Million Tonnes. Similarly, refinery throughput in the first six months (April-September) of the current financial year declined 2 per cent to 34.82 MT. The company’s Director-Refineries S M Vaidya said four of its nine refineries will witness either part or complete shutdown in the current financial year in a run-up to BS VI transition. “Most of the major refineries have undergone shutdown. The next major refinery which will undergo shut-down is Mathura, which will undergo shutdown between November-December (60 day shut-down). Haldia refinery is currently undergoing part-shutdown which will be completed by mid-January and Guwahati and Bongaigaon refineries will undergo part-shutdown from December to February,” he said. Singh also said that the company will take significant time to recoup the capital expenditure of Rs 16,000 crore made on supplying BS VI fuel. “The way the pricing is done today it is floating based on international prices. If you compare Euro IV and Euro VI prices there is no significant difference in the pricing in the international market. Although one or two parameters for Indian petroleum products are better, especially for gasoline, there are a few advantages, but the delta is very little. It will take significant time before we are able to recover these costs,” Singh said. He also added that the growth in the country’s petroleum product consumption in the current fiscal year is lower as compared to earlier years even as gasoline consumption grew 9 per cent in the first six months of the current fiscal and diesel use grew 1 per cent. “Second quarter typically witnesses low diesel demand because of monsoon months. Demand for diesel is also impacted by other factors as a lot of diesel is consumed in the transport sector,” Singh said. Singh also informed that the company will set-up a Joint Venture with Riyadh-based Al Jeri Group to set-up fuel retail outlets in Saudi Arabia and plans to set-up the first of these retail outlets in the next six months. According to Director of Marketing, Gurmeet Singh, the JV is yet to decide on the total number of fuel retail outlets to be set-up under the agreement.
Greece to split gas company DEPA, sell 65% stake – deputy energy minister
Greece plans to spin off the distribution grid and commercial operations of majority-state owned natural gas company DEPA and to sell its 65% stake in the two new firms, its deputy energy minister said on Thursday. The conservative government, which came to power in July, wants to speed up privatisations in the energy sector and attract foreign investment as the country emerges from a decade-long debt crisis. Deputy Energy Minister Gerasimos Thomas said the sale process is expected to begin “very soon”, at the end of the year or the beginning of next year. The remaining 35% of the new entities will be held by Hellenic Petroleum. He said there was strong interest from foreign investors in the utility, which imports gas from Russia, Turkey and Algeria. “We believe that the privatization will give the chance to make better use of and develop distribution networks in the country,” Thomas said. “Gas penetration is low.” A third company will remain state-owned after the split and will be in charge of the pipeline schemes, including a trans-border natural gas pipeline between Greece and Bulgaria known as IGB, Thomas said. DEPA’s privatisation was discussed at a cabinet meeting chaired by Prime Minister Kyriakos Mitsotakis on Thursday. The previous government had legislated a split in DEPA operations, aiming to sell a 50.1% stake in its retail business and a minority stake in its distribution grid. Mitsotakis’ government has prepared a bill amending that legislation, further liberalising the energy sector and reforming state electricity company PPC. Energy Minister Kostis Hatzidakis told reporters on Thursday the bill introduces flexible wage contracts that would boost hirings in PPC, scrap a 75% discount on electricity bills for employees and pensioners in place since 1990, and set conditions for voluntary exits. “PPC has managed to stick its head out of the water… but it still faces an uphill struggle,” Hatzidakis said.
Indian Oil second quarter net profit down 83% to Rs 563 crore
Indian Oil Corporation (IOC), the country’s largest fuel retailer, today posted an 83 per cent dip in net profit at Rs 563 crore for the second quarter ended September on the back of decreased revenue and fall in gross refinery margins. The company had posted a net profit of Rs 3,247 crore for the corresponding quarter ended September 2018. IOC’s revenue from operations declined 13 per cent to Rs 1,32,376 crore during the September quarter. The fuel retailer’s gross refining margin dropped to $2.96 per barrel for the first six months (April-September) of 2019, as compared to $8.45 per barrel posted in the corresponding period a year ago. Its refinery throughput declined marginally to 17.53 million tonnes (MT) in the second quarter of the current financial year from 17.81 MT posted in the corresponding quarter a year ago. Domestic sales in the second quarter increased marginally to 20.17 MT, as compared to 19.82 MT posted in the corresponding quarter last fiscal.
Private players stay away from India’s latest oilfield auction
The private players stayed away from the latest oilfield auction while the government received a total of eight bids, from ONGC and Oil India, for seven blocks on offer. ONGC has submitted bids for seven blocks and Oil India for one in the fourth round of the Open Acreage Licensing Programme (OALP), where bidding closed on Thursday, according to a statement on the website of the Directorate General of Hydrocarbons (DGH), the Oil Ministry arm that oversees oilfield auctions. No other company participated in the auction. This means ONGC will automatically get six blocks for lack of competition. For one block, it will have to compete with Oil India. The fourth round offered the lowest number of blocks and also received the least bids, among all the auction rounds of OALP. In the second round, 14 blocks attracted 33 bids while in the third round, 23 blocks received 42 bids. In the first, 110 bids were received for 55 blocks on offer. In three rounds together, 87 blocks have been awarded. “Expression of Interest submission window for the OALP-V bid round is open till November 30, 2019 and companies have another opportunity to take part in the blossoming Indian exploration & production sector,” the DGH said in a statement. Under OALP, a company has the freedom to carve its own blocks and let the government know about its interest in the block, which would then put that up for auction. The company, which has initially shown interest in the block, gets some preferential points during bid evaluation. The government has recently reformed the policy regime for exploration licenses to attract private capital. “Under this policy regime, the emphasis is on work programme, with no requirement for revenue share quotations for less explored Category II and III basins. A cap of 50% for revenue share in Category I basins has been introduced,” said the DGH. The fourth round has five blocks in category-II basin and one each in category-I and Category-III basin.
IOC commences deliveries of IMO-compliant low sulphur furnance oil
State-owned Indian Oil Corp (IOC) on Thursday said it has commenced delivery of fuel for ships that is compliant with International Maritime Organisation’s (IMO) low sulphur mandate. In a statement, the company said it commenced deliveries of IMO-2020-compliant Low Sulphur Furnace Oil (LSFO) with 0.5 per cent sulphur as marine fuel at Indian ports. “The first such supply was made on October 26, 2019, to the LPG tanker Berlian Ekuator at Kandla port,” it said. IOC has made available LSFO 0.5 per cent S grade marine fuel for immediate deliveries at Kandla and Kochi ports. “Bunker fuel deliveries at other Indian ports Mumbai, Mangalore, Tuticorin, Chennai, Visakhapatnam, Paradip and Haldia shall start by mid-November,” it said. IOC had earlier unveiled two new IMO 2020-compliant marine fuel grades as well as a range of marine lubricants specifically formulated and complaint with IMO 2020 low sulphur marine fuel specifications in Mumbai. “The LSFO 0.5 per cent S grade is produced from sweet crude oil grades with kinematic viscosity in the range of 220-270 cSt and complies with ISO 8217:2017 RMG380 standard,” IOC said. “This fuel addresses all quality considerations detailed by the International Organization of Standardisation in its recently released ISO 23263:2019 document including the Spot test for Compatibility.” IOC is the largest oil refiner and marketer in India. With extensive refining, distribution and marketing infrastructure and advanced R&D facilities, IOC endeavours to ensure India’s energy security and self-sufficiency in refining and marketing of petroleum products for past six decades, providing energy access to millions of people across the length and breadth of the country including the 7,517 km long Indian coastline.
BP eyes Brazil gas buildout, may swap LNG imports for domestic output
BP Plc wants to be part of an effort to build up natural gas infrastructure in Brazil, an executive said on Tuesday, and believes a power plant it is building in Rio de Janeiro could eventually be supplied by gas from offshore oilfields here. Speaking at Rio’s Offshore Technology Conference on Tuesday, BP Regional President for Latin America Felipe Arbelaez said he believed a plant being built by a consortium of BP, Germany’s Siemens AG and Brazil’s Prumo Logistica SA could eventually be fired by offshore gas rather than imported liquefied natural gas (LNG), as plans now forecast. “Associated gas can definitely compete with LNG in Brazil, and there is tons of associated gas,” Arbelaez said, using a term for the gas pumped from fields that primarily produce oil. “BP, over time, if I had to guess, will be satisfied with associated gas,” he said. Offshore gas is considered both a problem and opportunity in Brazil. The country is quickly ramping up oil production in offshore fields, many of which have significant gas volumes. Traditionally, gas produced in such fields is burned off or “re-injected” in a process that increases crude production. But some fields coming online have too much gas for those processes to remain viable. At the same time, there are few pipelines to bring the gas ashore and domestic consumption is weak. The government is encouraging more gas infrastructure, and firms with gas-heavy fields, such as Norway’s Equinor ASA , are looking at building pipelines and onshore terminals. “We’re convinced that there is a need for additional infrastructure to be built,” Arbelaez said. “We believe there is probably a need for between two to three … gas processing corridors in the next 10 to 15 years.” During the same panel, executives from Equinor and Portugal’s Galp Energia SGPS SA also said they expected to be selling offshore Brazilian gas to consumers within the next two years. “I have the certainty that Galp will be selling gas in the next two years to clients,” said Miguel Pereira, chief executive of Petrogal, a Galp unit. “We have to surpass some barriers but we are dealing with it.”