Saudi Arabia natural gas liquids output at about 880 mln bpd: Minister
Saudi Arabia’s energy minister said on Wednesday that natural gas liquids output has reached about 880 million barrels per day compared to domestic demand volume of 792 million barrels per day, Saudi state agency (SPA) reported. The energy minister, Prince Abdulaziz bin Salman, added that with the operation of the natural gas liquids plant at Shaybah oilfield, output will reach 960 million barrels per day by the end of the week, SPA said.
Energy is the new bridge in US-India relationship
With state-run Petronet LNG Ltd announcing its plans to invest in Tellurian Inc’s US Gulf Coast project, energy has cemented its place as the new bridge in the India-US bilateral relationship. Given that defence partnership was the cornerstone around New Delhi’s engagement with Washington, the LNG sourcing announcement and the CEO’s roundtable held during Indian Prime Minister Narendra Modi’s ongoing week-long visit to the US are of significant import. The presence of India’s petroleum secretary M.M. Kutty by PM Modi’s side at the energy round table held at Hotel Post Oak, Houston underlined the importance of energy security in the matrix of India-US relations. This comes in the backdrop of the relationship between the world’s oldest and largest democracies being strained recently due to a host of trade and economic issues. Houston, the global energy capital that was chosen as the venue for “Howdy Modi” event has also emerged as the epicentre of India’s energy security efforts in North Americas. Texas governor Gregory Wayne Abbott had also visited New Delhi last year and pitched his states’ resources. India has been sourcing liquified natural gas (LNG) and crude oil from the US, with Indian companies investing $4 billion in US shale gas assets. With India’s energy demand expected to grow at 4.2% per year over the next 25 years, it has contracted 9 million metric tonnes per annum (mmtpa) of LNG from the US, making it the sixth-largest buyer of US LNG. In a first, Indian Oil Corp., the country’s largest refiner, has also inked two term contracts totalling 4.6 million tonnes (mt) of US crude oil for 2019-20 from Norway’s Equinor ASA and Algeria’s state energy company Sonatrach. Modi met the chief executives of 17 US energy majors such as Exxonmobil, BP Plc, Cheniere Energy, Dominion Energy, and Total S.A. among others in his first engagement to start his week long visit. Referring to the energy CEO’s meeting, PM Modi in his speech on Sunday said that everyone was excited about India’s move to reduce corporate taxes. In a bold move to reverse the economic downturn and make India an attractive investment destination, the NDA government on Friday slashed corporate tax rates worth ₹1450 billion paid by domestic manufacturers, making the country one of the lowest tax regimes in Asia. Modi added that a positive message has gone to global business. Of energy security and the lone star state With India setting in place a new energy architecture with Texas and the US, this isn’t the first such engagement. After the four-decade ban on US oil exports ended in 2015, the first crude oil shipment from the US to India arrived in October 2017 in Odisha. Also, the first long-term LNG US cargo from the Houston-based Cheniere Energy Inc. reached Dabhol terminal in Maharashtra on 31 March last year. “It is impossible to come to Houston and not talk energy! Had a wonderful interaction with leading energy sector CEOs. We discussed methods to harness opportunities in the energy sector,” PM Modi said in a tweet. Tellurian Inc. has signed a $7.5 billion agreement for India’s Petronet LNG Ltd to buy a stake in its proposed LNG terminal near Lake Charles, Louisiana, in what could potentially be one of the largest foreign investments in the US for shipping shale gas abroad. India is the world’s fourth-largest LNG importer. In his speech on Sunday, president Trump said that US is the largest producer of energy and referred to the proposed Petronet—Tellurian deal. Petronet will spend $2.5 billion for an 18% equity stake in the $28 billion Driftwood LNG terminal, the largest outside holding so far in the project, and negotiate the purchase of 5 million tonnes of gas per annum. “The MoU signed in Houston is a part of wider energy cooperation under the India-US Strategic Energy Partnership and will further deepen our energy trade and investment relationship,” India’s oil minister Dharmendra Pradhan said in a tweet. The Houston meet was the third meeting between Modi and Trump this year and the first time ever a sitting US president has attended an event organised by the Indian community in the US. India and US plan to further strengthen their Strategic Energy Partnership that was launched in New Delhi in April last year. Four working groups have been created under the Strategic Energy Partnership—oil and gas, power and energy efficiency, renewable energy and sustainable development. Interestingly, even as India looks at the US as a reliable and long-term energy partner; New Delhi and Beijing are also set to roll out a buyers’ bloc to bargain collectively for crude oil purchases. Given the growing engagement between the Asian neighbours, it was US energy secretary Rick Perry who had pitched the US as a preferred energy partner during the inaugural meeting of the US-India Strategic Energy Partnership held in April 2018 in New Delhi. India has been recalibrating its crude sourcing strategy in the backdrop of the drone attacks on Saudi Aramco’s production facilities that has caused the biggest-ever disruption in global crude oil supplies. The National Democratic Alliance (NDA) government has also been holding conversations with the Donald Trump administration on the issue of energy imports from sanctions hit Iran. US secretary of state Michael Richard Pompeo on his part has promised India of adequate crude oil supplies even as India, the world’s third-largest oil importer, has been trying to buffer its consumers from the spike in global prices. India, the biggest emitter of greenhouse gases after the US and China, has been pushing for a gas-based economy and plans to connect 10 million households to piped natural gas by 2020. India plans to reduce its carbon emissions by 33-35% from its 2005 levels by 2030, as part of its commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in 2015. “Increasing natural gas use will enable India to fuel its impressive economic growth to achieve Prime Minister Modi’s goal of a $5 trillion economy while
Petronet Board disfavoured $2.5-bn US LNG deal in April-May; signs non-binding MoU now
The Petronet LNG Board had just six months back disfavoured a $2.5-billion deal to buy 18 per cent stake in US firm Tellurian’s proposed Driftwood LNG terminal, and import 5 million tonnes LNG a year from it for 40 years as the gas was available in plenty and no longer required equity investments, sources said. Petronet on September 21 signed a Memorandum of Understanding (MoU) with Tellurian “wherein Petronet and its affiliates intend to negotiate the purchase of up to five million tonnes per annum (5 mtpa) of liquefied natural gas (LNG) from Driftwood, concurrent with its equity investment, which remains subject to further due diligence and approval of its board of directors,” according to a joint statement. The Indian firm on Sunday evening in a regulatory filing said it had signed a “non-binding” MoU with Tellurian at Houston, USA. “The process is subject to due diligence and approval of respective Board of Directors,” it had said. Officials privy to board deliberations said the issue was discussed at the company’s board meeting in April/May and members felt that the company should not go ahead with the deal due to changing global gas market dynamics, where the fuel is available in abundance at rock bottom prices. Locking imports for 40 years together with an equity investment in the LNG terminal was not favoured, they said, adding Petronet’s promoters, including state-owned gas utility GAIL India Ltd, refiner Indian Oil Corp (IOC) and Oil and Natural Gas Corp (ONGC), were all against the deal. Company managing director and CEO Prabhat Singh neither answered calls and nor replied to text messages sent for comments. Petronet is a firm promoted by GAIL, IOC, ONGC and Bharat Petroleum Corp Ltd (BPCL), and Secretary to Ministry of Petroleum and Natural Gas, Government of India, is its chairman. The officials said the deal with Tellurian is far from closed and will require negotiations. The deal will go through if the government was to push for it, they added. If concluded, this would be the first long-term LNG import contract signed since the Narendra Modi government came to power in 2014. All the previous deals – 7.5 million tonnes with Qatar, 1.44 million tonnes with Australia, 2.5 million with Russia and 5.8 million tonnes with the US – were all signed during the Congress-led UPA regime. Petronet had first signed a broader agreement in February. The sources said India is looking at reopening pricing of previously entered LNG import deals with the US and Petronet board was of the majority view that locking in quantities and price for 40 years was not a good option at this point of time. Petronet signed the MoU on sidelines of Prime Minister Narendra Modi’s visit to Houston. GAIL had in 2011 signed a 20-year deal to buy 5.8 million tonnes per year of US LNG, split between Dominion Energy Inc’s Cove Point plant and Cheniere Energy Inc’s Sabine Pass facility in Louisiana. That deal prices of LNG were at 115 per cent of prevailing Henry Hub price of gas plus $5.05 per million British thermal unit. The landed price in India comes to $9-10 per mmBtu against LNG being available in the spot or current market for $5-6. GAIL wants to renegotiate the 2011 sales and purchase agreement (SPA) with Cheniere Energy for import of 3.5 million tonnes of LNG annually, with yearly fixed fees of $548 million and a term of 20 years. Besides the 3.5 million tonnes per annum of LNG from Houston-based Cheniere, GAIL has booked 2.3 million tonnes a year capacity at Dominion’s Cove Point liquefaction facility. In the statement, Tellurian and Petronet had stated that they will endeavour to finalise the transaction agreements by March 31, 2020. Petronet’s regulatory filing, however, did not mention of this deadline. Tellurian is investing $28 billion in setting up a 27.6 mtpa liquefaction export facility near Lake Charles, Louisiana on the US Gulf Coast. In April, the US Federal Energy Regulatory Commission (FERC) issued the order granting authorisation for Driftwood LNG and the 96-mile Driftwood Pipeline, which will inter-connect the LNG terminal to the US natural gas market.
LNG prices seen wallowing at 10-year seasonal lows by year end
Asian LNG prices will likely be at their lowest, seasonally, in a decade by the end of the year as rapidly rising production outstrips feeble demand, weighed down by a global economic slowdown and the U.S.-China trade war, traders said. Most trade sources in a Reuters survey forecast spot Asian liquefied natural gas for December delivery to go no higher than $6 per million British thermal units, which would be the lowest for that month since Refinitiv began collecting such data in 2010. They said January and February prices were unlikely to rise much above December’s level. Six dollars per mmBtu is lower than the current price of financial LNG contracts, indicating traders see them as overvalued. Supplies of the super-chilled gas have been boosted in the past year by new terminals in Australia, Russia and especially the United States. This rise has upended gas markets in Europe, bringing continent-wide inventories to multi-year highs. Spikes in crude oil and European gas prices over the past two weeks failed to alter the bearish mood. Industry sources said low spot buying from Asia and full stocks in Europe were the major reasons for weak prices this winter. “I don’t see a clear premium market this winter. Japan is not growing, India’s buying is opportunistic, China was supposed to be the big place, but now it’s not. In Europe, once stocks are totally full there is no way this flow continues,” one trade source said. Traders identified potential issues that in a normal year would boost prices – a looming Ukraine-Russia gas dispute, surprise outages, sudden cold snaps like the 2018 “Beast from the East”, to name a few. But stocks are so high, Europe could weather such problems. “You really need a combination of a cold winter in both Asia and Europe and a cut in Russian transit to end the winter with low storage levels,” a European-based trader said. “We could survive a strong cut in Russian flows through 2020.” Refinitiv gas analysts sounded a note of caution, however, saying in their winter report that the northwest European market would be tighter compared to last year’s unusually mild winter. JAPAN OVERCOMMITTED With robust and reliable supply in Asia-Pacific and healthy stock levels, there is no need for big buyers such as Japan, China and South Korea to import spot cargoes from Atlantic producers unless a protracted cold snap occurs. Some traders noted that in South Korea demand may be boosted by a proposed shutdown, yet to be approved by the government, of more than a dozen coal plants this winter. Meanwhile, traders are learning not to expect the demand surge from China that in previous years boosted prices to multi-year highs and turned it into the world’s second-largest purchaser of LNG. Not only are Chinese players better organised for winter buying, but the country’s exponential growth has the trade dispute hanging over it. China slapped tariffs on U.S. LNG last year, and tit-for-tat trade levies have taken their toll on economic growth forecasts as well as industrial demand. Neither do traders expect much demand for LNG on the spot market from Japan, the world’s top LNG buyer, which is well supplied by its long-standing contracts with U.S. producers. “Many Japanese buyers are overcommitted to term cargoes. New projects in the U.S. starting up have Japanese term customers, so if these volumes come in I don’t see how there will be a need for spot,” a Japan-based industry source said.
Japan to invest $10 bln in LNG, breaking dependence on Mideast oil
Japan’s public and private sectors will invest $10 billion to encourage the broader use of liquefied natural gas (LNG) across the world, the Nikkei reported on Tuesday, because of concerns about stable crude oil supply from the Middle East. Japan’s government aims to lessen its dependence on oil from Middle East after drone attacks on Saudi Arabian oil facilities on Sept. 14, with its crude oil imports coming from the region at roughly 90%. The country’s industry minister Isshu Sugawara will make an announcement of the plan at the LNG Producer-Consumer Conference in Tokyo on Thursday, the newspaper said. The $10 billion will come from public-sector financing and investment from bodies such as the Japan Bank for International Cooperation and the state-backed Japan Oil, Gas and Metals National Corp as well as private trade houses and financial institutions, according to the Nikkei. With the $10 billion, Japan plans to fund projects such as processing plants, receiving terminals and power generation, the Nikkei said.
Britain set to receive two LNG tankers from Qatar in October
Britain will receive two liquefied natural gas (LNG) tankers from Qatar at the start of October, Refinitiv shipping data showed on Monday. The Al Sahla, with a capacity of 212,000 cubic metres, is due to arrive in Milford Haven on Oct 3. The Mozah, with a capacity of 262,000 cubic metres, is set to arrive at the Isle of Grain terminal on Oct. 11.
IOCL, BPCL, NTPC, Power Grid, GAIL spent more on CSR than research: Will firms turn CSR into CIR?
By broadening the scope of the mandatory corporate social responsibility (CSR) spending, the government has effectively facilitated the concept of CSR to be turned into corporate innovation responsibility (CIR). The move essentially provides a nudge to companies to spend up to 2 per cent of their profits on supporting research and innovation. To be sure, companies were allowed to grant money from the CSR kitty to tech-incubators located within academic institutions approved by the Centre. The government has now expanded the scope of spending CSR budget on incubators funded by central or state governments, or any agency or public sector undertaking of central or state governments, and making contributions to public funded universities, IITs, national laboratories and autonomous bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, ministry of electronics and information technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting sustainable development goals. This has the potential to give rise to more public-private partnerships in scientific discovery, innovation and technical education, a tradition that is well developed and followed in the West but not so in India. It will encourage Indian companies to support research in the areas of their expertise or interest. Indian companies largely have a poor record of investing in research, development and innovation. Data from Bloomberg shows that only 34 of the 50 Nifty companies invested in research and development (R&D) in 2018-19. Their cumulative expenditure stood at Rs 20,890 crore. Incidentally, ten of these companies spent more on CSR than on R&D. Five public sector undertakings – IOCL, BPCL, NTPC, Power Grid Corporation and GAIL – spent more on CSR than research. Against this, the 50 Nifty companies spent a total of Rs 7,093 crore on CSR. With research funding allowed to be made from the CSR kitty, companies that had been hesitant on spending on CSR would now be more willing to support innovation that may potentially help their business. Pharmaceutical companies are a case in point. Sun Pharmaceutical Industries, for instance, spent Rs 1,977 crore on R&D in FY19 but only Rs 3.9 crore on CSR. Such companies can now easily marry the two objectives of supporting research and drug discovery as well as doing social good in the process. Banks and financial service institutions, which do not report any expenditure on R&D, can look at investing part of their CSR budget in research on financial inclusion, digital banking and new technologies in digital banking. The government has pushed the ball in India Inc’s court. The moot question is – will it deliver?
Oil prices will ease if global tensions do not flare up: Dharmendra Pradhan
India’s oil minister Dharmendra Pradhan said on Monday global oil prices would ease if there is no further escalation of geopolitical tensions. Oil prices had jumped by as much as 19% early last week before coming off peaks after an attack on oilfields of Saudi Arabia over the previous weekend disrupted 5% of global oil supply. The price of crude oil has already reduced by a few dollars per barrel, Pradhan said in Hindi at an industry event in New Delhi. Rising global oil prices are a major concern for India, the world’s third biggest oil importer, which meets almost 84% of its oil needs through imports.
Petronas to step up security after Saudi attacks, warns on oil price volatility
Malaysia’s state-owned energy giant Petronas said it would beef up security at its plants after an attack on a Saudi hub last weekend, and warned oil price volatility in the rest of the year could affect its year-end performance. Heightened vigilance over security comes as the firm, known in full as Petroleum Nasional Bhd, nears the start of commercial operations at a $27 billion refinery and the petrochemical project built jointly with Saudi Arabia. Oil prices jumped by as much as a fifth after an attack on a key Saudi Arabian supply hub last weekend. Petronas said the market was expected to remain volatile in the second half due to the protracted U.S.-China trade war, sluggish demand and a slowing global economy. “These prevailing uncertainties are expected to pose challenges to the overall year-end performance of the Petronas Group,” it said in a statement. Petronas’s president and chief executive Wan Zulkiflee Wan Ariffin told reporters that last weekend’s drone and missile attack in Saudi Arabia was “an escalating risk”. “I think we are familiarising ourselves with the technology,” he said, according to state news agency Bernama. Petronas said work at its Saudi-partnered refinery and petrochemical project, the Pengerang Integrated Complex in the southern state of Johor, was 99.7% completed as of June 30. It was hit by a fire in April. The firm reported on Friday an 8% rise in second-quarter profit after tax to 14.7 billion ringgit ($3.52 billion), up from 13.6 billion ringgit in the same period last year. The increase was boosted by foreign exchange fluctuations but was partially offset by higher product costs. Revenue fell marginally to 59.1 billion ringgit from 59.2 billion ringgit, mainly due to lower average sale prices for petroleum products and liquefied natural gas (LNG). For the first half of the year, Petronas’ total oil production volume rose 1.4% from the same period last year. Sales of LNG were up 5%, the firm said. Petronas also confirmed that Mohamad Anuar Taib, the CEO of its upstream business, will be leaving the firm this week, Bernama reported. The company had denied reports of his departure in June, but now says that Mohamad Anuar had asked to resign for personal reasons. “We have a strong succession plan in place, and (his departure) does not have any impact to our business plans going forward,” chairman Ahmad Nizam Salleh was quoted as saying.
Petronet to sign $2.5 billion LNG deal with US developer Tellurian: Sources
India’s Petronet LNG is set to sign a deal with US liquefied natural gas (LNG) developer Tellurian Inc worth more than $2 billion in the proposed Driftwood project in Louisiana, two sources told Reuters. This will be part of wider cooperation between both countries, with Indian Prime Minister Narendra Modi expected to meet US President Donald Trump in Houston this weekend to discuss ways to deepen their energy and trade relationship. India could increase its trade footprint at a time when the United States and China are in the midst of a tit-for-tat trade war, analysts have said. Petronet will sign a memorandum of understanding (MOU) with Tellurian on Saturday to invest $2.5 billion for rights of up to 5 million tonnes a year of LNG over the lifespan of the project, two sources familiar with the matter said. The MOU will be signed at an energy forum in the presence of Modi, one of the sources said, declining to be named as he was not authorised to speak with media. This would be a big part of Modi’s trade discussion with US President Donald Trump, he said. Indian gas importer Petronet and Tellurian had first signed a broader agreement in February which did not specify investment numbers or offtake volumes. India is expanding its pipeline network and building new LNG import terminals to encourage the use of cleaner fuel. Modi has set a target to raise the share of natural gas in India’s overall energy mix to 15% in the next few years from about 6.5%. Tellurian is offering an equity interest in Driftwood Holdings, which comprises Tellurian’s upstream company, its pipeline and the upcoming terminal that will be able to export 27.6 million tonnes of LNG a year. A $500 million investment in Driftwood would give the stakeholder rights over one million tonnes a year of LNG over the life of the project, according to a presentation by Tellurian posted on the US company’s website. Both companies could not immediately be reached for comment.