China gas demand to surge through 2035, coal to still offer stiff rivalry
China’s natural gas demand is expected to rise by more than 300 billion cubic metres (bcm) between 2018 and 2035, or 30% of global volume growth, stoked by the country’s push to shift to the cleaner fuel from coal, a senior executive of PetroChina said on Wednesday. However, despite the huge growth potential, natural gas still faces stiff competition from coal as a fuel for power generation and heating as China advances low-emission, or so-called “clean-coal” technology, said Ling Xiao, a vice president of China’s top oil and gas producer, addressing an industry gathering in Singapore. Meeting part of that demand surge, gas from Russia’s Siberia fields is due to start arriving at the Chinese border from December. That supply, however, is more costly than the domestic wholesale benchmark, meaning PetroChina as the contractual buyer of the gas will incur losses in marketing the fuel, said Ling. “It’s slightly cheaper than central Asian gas but PetroChina will still be making a loss as it (the price) exceeds that of domestic city-gate benchmark rates,” Ling told Reuters, speaking separately on the sidelines of the Singapore International Energy Week. Russian gas giant Gazprom will supply China about 5 bcm of gas for 2020, via the landmark ‘Power of Siberia’ project, but the full ramp-up to the designed annual capacity of 38 bcm will depend on the cost of gas and how affordable that is to Chinese consumers. China consumed 280 bcm of gas last year, making up 7.4% of the world’s total demand, Ling said. PetroChina is due to publish its third-quarter earnings later on Wednesday. For power generation, gas faces stiff rivalry from coal in which China has advanced ultra-low emission coal technology, and from renewables such as solar, while cost of solar power generation has dropped drastically over the past decade or so, Ling said. For imported gas to be economical versus these competing fuels, the prices end-users, such as power plants, pay at their factory gate shall be capped at 1 yuan to 1.9 yuan per cubic metre, said Ling. That roughly equals to $3.8 to $7.2 per million British thermal unit (mmbtu). Since July 2018, Chinese national energy producers have been expanding exploration and development both onshore and offshore, leading to several major discoveries such as conventional gas deposits in the Tarim basin in the northwest and shale gas prospects in Sichuan basin in the southwest. China could amass a total natural gas supply capacity from domestic fields of nearly 700 billion cubic metres by 2035, Ling said, without elaborating on how much the actual output could possibly reach in that period.
Petronet net nearly doubles on lower corporate tax rate
Petronet LNG Ltd, the country’s biggest importer of liquefied natural gas, on Tuesday reported a near doubling of net profit in September quarter as it derived benefit of lower corporate tax rate. Net profit in July-September at Rs 1,089 crore was 90 per cent higher than Rs 572.89 crore net profit in the same period, company CEO and Managing Director Prabhat Singh told reporters here. “Pursuant to the introduction of the lower tax rates for corporates by the government for FY 2019-20, the company has taken the benefit of lower corporate tax rate of 22 per cent (as against 30 per cent) in the current quarter,” he said. “Due to the same, there is a reversal of deferred tax liability of Rs 380 crore.” Revenue from operations, however, slipped to Rs 9361.18 crore from Rs 10,745.34 crore in the second quarter of the previous fiscal year due to fall in volumes, prices and foreign exchange variations. Lower LNG imports impacted revenues by Rs 900 crore while an over USD 1 drop in gas prices led to Rs 560 crore cut in revenues. Also foreign exchange variation cost was Rs 150 crore, he said. Petronet’s Dahej import facility in Gujarat operated at around 108 per cent of its expanded name place capacity of 17.50 million tonnes and processed 240 trillion British thermal units of LNG as against 211 TBtus processed a year back. Its Kochi terminal operated at 20 per cent of the 5 million tonnes name place capacity. “The company elected to exercise the option of a lower tax rate of 25.17 per cent (announced last month by the government),” the notes to the company’s financial results said. “Accordingly, the deferred tax liabilities (net) (DTL) as at June 30, 2019 and estimate of tax expense for the quarter ended June 30, 2019 have been remeasured and resultant impact of Rs 376 crore on DTL and Rs 70 crore respectively pertaining to previous quarter have been recognised in the current quarter.” Petronet said its board of directors approved a special interim dividend of Rs 5.50 per share for the 2019-20 fiscal year.
India to spend $100 billion on energy infra, says PM inviting Saudi investment
India will invest a massive $100 billion in oil and gas infrastructure to meet energy needs of an economy that is being targeted to nearly double in five years, Prime Minister Narendra Modi said on Tuesday as he sought investment from oil kingpin Saudi Arabia and other nations to boost supplies. Speaking at Saudi Arabia’s annual investment forum, also known as ‘Davos in the desert’, Modi promised stable, predictable and transparent policy regime to catalyse foreign investments. “India is investing heavily in oil ad gas infrastructure,” he said adding as much as $100 billion will be spent by 2024 in creating additional oil refining capacity, laying new pipelines and building gas import terminals. The world’s third-largest energy consumer is 83 per cent dependent on imports to meet its oil needs and about half of its gas needs are shipped from abroad. Its per capita energy consumption is a fraction of the global average and it is now investing heavily in physical infrastructure as well as city distribution to boost availability in a growing economy. Saudi Arabia is India’s second-largest supplier of crude oil and New Delhi is keen to expand this partnership beyond the buyer-seller relationship into a strategic one with cross investments. Modi highlighted the recent opening of the fuel retailing sector for non-oil companies to lure investment in the world’s fastest-growing consumption centre. “India needs investments in the energy sector to meet the demand of a fast-expanding economy. And I request energy companies present here to take advantage of this opportunity,” he said. Modi said Saudi national oil company Aramco has decided to invest in the 60 million tonnes a year West Coast refinery project in Maharashtra – which will be Asia’s biggest refinery. Aramco, whose planned initial public offering is touted to be as big as the size of the Indian economy, too is keen to venture into fuel retailing and the petrochemical sector so as to lock-in consumer for its oil in a world that is fast-moving towards renewable energy sources and electric vehicles. “I want to ensure you that India’s rate of growth is going to rise further. We are taking steps for the growth of our economy,” he said. “We are improving on our ease of doing business ranking. Due to political stability, predictable policy, and big diverse market, your investment in India will be most profitable.” Stating that infrastructure is a technology multiplier, he said it not only provides investment opportunity but it also important for the growth of the business. “The requirement of physical infrastructure is in developing countries. Asia requires $700 billion per year for infrastructure development. We have set an investment target of spending $1.5 trillion on infrastructure development in the next few years,” he said. This target includes oil and gas plus other infrastructure such as roads, airports, and ports. The prime minister said India is targeting to nearly double the size of its economy to $5 trillion in the next five years. “Roadmap for reaching the $5 trillion economy target is ready. The target is not only about quantitative growth but also about improving the quality of life of every Indian.” He said five big trends impacting global businesses are technology and innovation, infrastructure, human resources, compassion for the environment and business-friendly governance. Transformative technologies such as Artifical Intelligence, Genetics, and nano-technology have become part of daily life, he said adding India has become the world’s third-largest startup ecosystem. “Indian start-ups are acing everything, from food delivery to transport, to hospitality, to medical treatment, to tourism,” he said urging venture funds to invest in start-ups in the country. Stating that infrastructure is an opportunity multiplier, he said infrastructure is needed for the business to grow. India, he said, is adopted an integrated approach for infrastructure development. “India is integrating infrastructure through one nation one power grid, one nation one gas grid and one water grid, one nation one mobility card, one nation one optical fibre network.” Infrastructure growth in India will be in double-digit and there is no possibility of capacity saturation. For international investment depends on quality manpower and so skilling of human resources is essential, he said, adding 400 million people will be skilled in different streams in 3-4 years. “International trade agreements should not be restricted to goods alone. Manpower and talent mobility should be an integral part of it,” he said.
Indian LNG customers choosing spot buys over long-term deals – Petronet LNG exec
* Indian customers are choosing spot cargoes over long term LNG contracts as spot purchases are cheaper, Prabhat Singh, chief executive of India’s Petronet LNG Ltd said on Tuesday. * Petronet is considering renegotiating long term LNG contracts with Qatar’s RasGas, Singh said * Delivered Price Of Spot LNG is $6.30-$6.40/Mmbtu vs $7.50-$8.50/Mmbtu for supplies under long term deals, he said * Russia’s Novatek wants to set up a small scale LNG plant in India for retail sales, he said * Singh said Petronet was looking at buying a 26% stake in Bharat Petroleum Corp Ltd’s planned east coast terminal * Petronet will appoint an adviser in November for due diligence of a deal with Tellurian Inc, he said. * Petronet benefitted from lower corporate tax during the September quarter, Singh said
RIL draws government ire by monopolising sale of its own CBM
The government is weighing options of terminating the production-sharing contract (PSC) or invoking arbitration to penalise Reliance IndustriesNSE 0.32 % (RIL) for selling to itself all the coal bed methane (CBM) it produces, allegedly in violation of policy, sources said. The government has informed RIL of its objection to the gas sale, but the company asserted it had acted transparently and correctly, sources familiar with the development said. A RIL spokesman told ET that the gas sale had also maximised government benefits because it won the auction by bidding a higher price, which, in turn, increases the state share of profit from the output, apart from increasing tax revenue. “RIL conducted open and transparent bidding process through a reputed independent third party, in compliance with provisions of the CBM contract and policy. RIL emerged as the highest bidder. Supply of CBM gas to RIL, pursuant to the bidding process, maximises benefit to the government. Gas being supplied from RIL’s block is in compliance with provisions of the CBM contract and policy,” the spokesperson told ET. The oil ministry did not respond to ET’s query, but sources familiar with the development said it was considering the matter. “There are two options — terminate the PSC or invoke arbitration. The government is yet to make up its mind on which course to take,” said the source. Officials said that according to policy, a producer can sell CBM to an affiliate if it fails to find a buyer in an open and transparent auction. The government felt RIL didn’t act in line with policy by not waiting to find a buyer, and participating in the auction along with other bidders. They said the transaction could not be regarded as an arm’s-length sale because Reliance Industries itself appointed Crisil Risk and Infrastructure Solutions that managed the auction,and that allegations of conflict of interest cannot be ruled out. In response to RIL’s argument, that its participation in the auction helped discover a higher price, officials said sanctity of the process was more important because if bidders lost faith, future auctions may see limited participation and lower price discovery. The oil ministry took a view late last year that RIL was wrong in buying all the CBM it would produce in Madhya Pradesh until March 2021. This followed a yearlong process that involved consultations with the Directorate General of Hydrocarbons (DGH) and the law ministry as well as a representation from Reliance Industries. RIL had bid highest in an auction held in September 2017, which was preceded by two similar but shorter CBM auctions that year, in both of which RIL emerged winner. The DGH, quasi-regulator for the upstream sector, raised concerns about the sale, which prompted the oil ministry to thoroughly examine the matter. Government action can trigger a long legal battle –one reason why it hasn’t acted in a hurry. The government and Reliance Industries, India’s largest company by market value, are already waging legal battles over several oil sector-related disputes. Officials said Reliance’s action in the sale of CBM gas may set a precedent. Recently, BP group chief executive Bob Dudley said its joint venture with RIL can sell natural gas from its KG D6 deep sea project to its affiliates without violating the terms of its production sharing contract with the government. The deep-sea gas auction is slated for early November. Sources close to Reliance question the CBM policy, saying it’s unfair to not permit a company to bid for the gas it produces. By barring RIL, one of the biggest consumers of gas, from bidding for the gas it produces, the policy doesn’t allow fair price discovery, they said. To address this, the oil ministry, while deciding on RIL’s CBM sale case last year, had also mooted the idea of amending policy by permitting affiliates to participate in auction if the bidding process is conducted by the Directorate General, according to people familiar with the matter. There is no progress on that yet.
Total-Adani Gas deal gives boost to natural gas market
French oil major Total is set to buy 37 percent of Adani’s gas distribution business in a $600 million deal. Total will supply LNG to Adani Gas to service 6 million homes, as well as sell it through 1,500 retail service stations that the two conglomerates plan to set up over the next decade. Patrick Pouyanné, chairman and CEO of Total, said in a statement that the natural gas market in India will see “strong growth” and is an “attractive outlet” for Total, which claims to be the second-largest LNG player in the world. The growth that Pouyanné refers to will come from India’s ballooning middle class which will propel energy demand. As also the Indian government’s push to make gas a larger part of the energy mix from 6 percent currently to 15 percent by 2030. Total isn’t the only foreign oil and gas company to eye what is one of the world’s fastest growing energy markets. BP recently extended its long-standing partnership with Mukesh Ambani’s Reliance Industries (RIL) to jointly build a petrol station network and aviation fuels business. Saudi Aramco took a 20 percent stake in RIL’s oil refining unit, at a value of $75 billion, including debt, in August. But can India achieve the 15 percent target it has set and what will it take in addition to investments from foreign majors? “We do not believe this target can be met as gas is uncompetitive in the power sector,” says Nicholas Browne, research director at consultancy Wood Mackenzie. It would require a combination of factors, he explains. “These include discovery of substantial low cost gas resources, subsidies of gas use in the power sector, an accelerated development of gas distribution before 2030, and restrictions on coal generation.”
Cabinet lowers entry barrier for petrol pump business
The cabinet significantly eased entry barriers in the state-dominated petrol pump business to encourage competition from Indian and foreign firms. It also approved a revival package for state-owned telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) that aims at the eventual merger of the withering former monopolies. It also raised the minimum support price (MSP) for rabi, or winter sown, crops by 5-7% to increase rural incomes by giving a higher assured price at which state agencies buy crops such as wheat, pulses and oilseeds. The cabinet also approved a bill to regularise unauthorised Delhi colonies on more than 175 sq km, which will give 4 million people better civic amenities and ownership rights. It scrapped the 17-year-old entry condition of investing Rs 2,000 crore in the oil sector to be eligible for setting up petrol pumps. Any company, including those not in the oil sector, with a net worth of Rs 250 crore can retail fuel in the country, which is one of the biggest and fastest-growing oil consumers in the world. 5% Pumps in Remote Areas The new entrants, domestic or foreign, will have to set up 5% of their pumps in remote areas, and each retail outlet must have facilities for at least one alternative fuel such as compressed natural gas, LPG, biofuel or a charging point for electric vehicles. Several foreign companies have shown interest in the lucrative fuel retail market in the past. These include Saudi Aramco, BP Plc, Total and Trafigura, which along with Russia’s Rosneft has acquired Essar Oil’s refinery. BP already has a licence and is joining Reliance in a retail joint venture. The decision also makes the market more competitive for the company that acquires the government’s majority stake in Bharat Petroleum Corp. Ltd (BPCL). The company has 14,803 of India’s 64,625 pumps. Others running pumps are Indian Oil Corp. (27,702), Hindustan Petroleum Corp. Ltd (15,440), Nayara Energy, previously Essar Oil (5,128), Reliance Industries Ltd (1,400) and Shell(145) as of June. Telecom minister Ravi Shankar Prasad said at a briefing that the Rs 29,937 crore BSNL-MTNL revival package will have several components. It will include the raising of Rs 15,000 crore through sovereign bonds and monetising assets worth Rs 38,000 crore in the next four years, besides a voluntary retirement for employees to cut costs, he said. Pending the merger, MTNL will act as a subsidiary of BSNL.
Oil and gas giants spend 250 mn on EU lobbying: Green groups
The five biggest publicly listed oil and gas companies and trade groups representing them spent more than 250 million euros lobbying the European Union to influence climate action since 2010, environmental groups said Thursday. Research showed that BP, Chevron, ExxonMobil, Shell and Total, as well as trade groups acting on their behalf, have held at least 327 high level meetings with European Commission officials since Commission President Jean-Claude Juncker took office in 2014 — an average of more than one a week. The findings came from publicly listed documents and companies who responded to requests for comments said there was no conflict of interest in their executives meeting high-level EU policymakers. But green groups said the money spent on access to officials showed oil and gas firms were seeking to influence decisions in Brussels. “This is part of a long trail of the fossil fuel industry delaying, weakening and torpedoing much-needed climate action,” Pascoe Sabido, a researcher and campaigner with Corporate Europe Observatory, told AFP. The EU is seen as one of the global leaders when it comes to climate action. But there are fears its member states are not phasing out fossil fuels quickly enough to comply with the 2015 Paris climate accord, which commits nations to limit warming to “well below” two degrees Celsius (3.6 Farenheit). The European Commission did not respond to a request to comment from AFP. Last year the International Panel on Climate Change (IPCC) called for a radical drawdown in fossil fuel use in order to hit the safer 1.5C cap laid out in the Paris deal. Yet global emissions are rising year on year, and environmental groups fear major EU gas infrastructure projects in the pipeline could lock the continent into fossil fuels well beyond the IPCC’s deadlines. – ‘Fossil free politics’ – The investigation by Corporate Europe Observatory, Food & Water Europe, Friends of the Earth Europe, and Greenpeace EU looked at companies’ own declarations and the EU’s lobby transparency register and published meetings. It found that the five firms declared spending of 123.3 million on EU lobbying between 2010-2018. Trade associations representing them spent an additional 128 million in that period. In April the watchdog Global Witness calculated that oil and gas majors were planning to spend $5 trillion (4.5 trillion euros) on new exploration by 2030, a figure it said was “poles apart” from the Paris goals. A spokeswomen from Total told AFP that the figures contained in Thursday’s report “in no way reflect” what the group spends on lobbying. Public records show Total spent between 1,750,000-1,999,999 euros on EU lobbying last year, an amount the spokeswoman said had stayed “stable for many years”. “Total is convinced that a collective approach is necessary to respond to the magnitude of the climate issue,” she said. An ExxonMobil spokesman said the giant “complies fully with the requirements of the EU Transparency Register.” “ExxonMobil believes that climate change risks warrant action and it’s going to take all of us — business, governments and consumers — to make meaningful progress,” he told AFP. A spokeswoman for Shell said it “firmly rejected” the report’s premise. “We are crystal clear about our support for the Paris agreement… everything we do is to advocate for good policy outcomes to that end.” BP and Chevron did not respond to requests for comment. – ‘Firewall’ – The green groups called for a “firewall” to protect EU officials from fossil fuel representatives to avoid conflicts of interest. “Tackling the climate emergency means leaving the vast majority of known fossil fuel reserves underground and that is incompatible with the future projections of these firms who are going to massively increase their production over the next 10-20 years,” Sabido said. Myriam Douo, from Friends of the Earth Europe, said citizens could no long afford the “delay tactics” of fossil fuel producers. “We must listen to the millions of young climate protesters on our streets and cut fossil fuels out of our politics now.”
India eases rules for entry into fuel retail sector: Javadekar
India’s cabinet on Wednesday relaxed norms for setting up fuel stations in the country, the information and broadcasting minister said, a move that could help private and foreign firms to enter a sector dominated by state-owned companies. The new rules will allow companies to set up electric vehicle charging stations, and sell gas, petrol and diesel at their pumps, Prakash Javadekar told a news conference. “Companies would be able to sell all sorts of transportation fuels at their petrol pumps,” Javadekar said. Global oil companies including Saudi Aramco, Trafigura’s downstream arm Puma Energy and France’s Total are interested in setting up fuel stations in India, where fuel demand is expected to rise in the years to come.
Brookfield acquires 25-percent stake in $8B Dominion Energy LNG facility at Chesapeake Bay
Dominion Energy is selling a quarter stake in its East Coast liquefied natural gas (LNG) facility for more than $2 billion. Brookfield Super-Core Infrastructure Partners will pay to obtain a 25-percent non-controlling equity interest in Dominion’s Cove Point LNG LP. The Dominion entity owns a LNG import, export and storage facility on the western shore of Chesapeake Bay in Maryland. The Brookfield infrastructure fund’s investment will total a little more than $2 billion in cash consideration, excluding working capital. The transaction also gives Cove Point an implied capital value of more than $8 billion. The deal is part of Dominion’s previously announced intention to established a permanent capital structure for Cove Point. “The agreement highlights the compelling intrinsic value of Cove Point and allows us to efficiently redeploy capital toward our robust regulated growth capital programs,” Dominion CEO Thomas Farrell said in a statement. “We are very excited to have a highly respected infrastructure investor such as Brookfield as our partner in this world-class facility.” These assets provide liquefaction, gasification, transportation, storage and peaking gas supply services to customers in the United States, India and Japan. It also includes a 136-mile pipeline that interconnects the facility with the U.S. interstate pipeline system. In 2018, the company completed a $4.1 billion expansion to enable natural gas exports. The Cove Point transaction with Brookfield is expected to close by the end of this year. Dominion Energy will retain full operational control of the facility and its services, and current employees and customers will not be affected by the recapitalization agreement. Utilities such as Dominion, AES and Sempra are investing in LNG projects.