Brookfield, Temasek eye GAIL’s gas pipeline assets; IOC, BPCL also in fray
Canada’s Brookfield Asset Management and Singapore’s Temasek Holdings have joined the race to buy the gas pipeline assets of state-run GAIL (India), three people aware of the matter said. A potential deal would be a vital win for Brookfield, which recently bought the gas pipeline assets of Reliance Industries. GAIL owns more than two-thirds of India’s 12,000-km pipeline network. The company, which is in the process of divesting its pipeline business, has already received interest from state-run Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) for the gas transmission assets. “Prospective bidders have begun initial discussions with GAIL and are expected to put a formal offer once a formal sale process begins post the demerger,” said the first of the three persons cited above, all of whom requested anonymity. Brookfield and Temasek declined to comment emails sent on September 6. GAIL too did not reply to an email sent seeking details of the stake sale process. The government has been planning to split GAIL by hiving off its gas marketing and pipeline business into a separate entity and selling a majority stake in it to strategic investors. The government holds 52.68 percent in GAIL, which had a market capitalisation of Rs 59,195.61 crore as on September 6. GAIL’s marketing business brought in more than three-fourths of its total revenue in the last fiscal. GAIL, India’s biggest natural gas marketing and trading firm, is also adding another 9,000 km of pipelines. The company dominates India’s gas marketing landscape with a 59 percent share. An IOC official said the company sees huge value in GAIL’s transmission assets as it plans to expand its own gas distribution network. IOC, the second-largest gas marketer in India after GAIL, has lined up aggressive expansion plans for city gas distribution. A BPCL official said GAIL’s transmission network will give a fillip to its plans of expanding in the gas distribution business. Last fiscal, BPCL hived off its gas business into a separate wholly-owned unit so that the company can sharpen its focus by bringing all natural gas-related businesses into one fold. Spokespersons at IOCL and BPCL did not respond to emails sent on September 6 on whether they plan to bid for GAIL’s pipeline assets. A second person, an investment banker aware of the talks said, “The RIL-Brookfield pipeline deal has set a precedent for such asset monetization. GAIL too has been exploring this option. They have held talks with several investors including, Brookfield and Singapore’s Temasek”. This March, Brookfield’s India Infrastructure Trust, an InvIT, bought RIL’s loss-making entity East-West Pipeline for Rs 13,000 crore. The InvIT took 100 percent stake in Pipeline Infrastructure Pvt that owns and operates the East-West Pipeline. Though GAIL has argued that its gas marketing and transmission businesses operate at arm’s length and hence splitting them is of little significance, the government, in order to meet part of its Rs 1.05 trillion targets for raising revenue from disinvestments this fiscal, is keen on the bifurcation. To achieve its disinvestment target last fiscal, the government has sold its entire 51.11 percent stake in refiner Hindustan Petroleum Corporation (HPCL) to state-run Oil and Natural Gas Corporation (ONGC) for Rs 36,915 crore. GAIL, which took shape in August 1984 after it was spun off from ONGC’s gas business, has multiple long-term contracts to import gas in its liquid form (LNG) from countries such as the US. It is currently unclear if the strategic buyers would be given the responsibility of retaining these contracts. One option is to allow GAIL to continue with the marketing business that would include all the sale contracts and the city gas retailing. Since GAIL has been maintaining separate accounts for its gas pipeline and marketing businesses, analysts said this makes it easier to split them into two entities. GAIL’s net worth rose to Rs 39,062 crore last fiscal from Rs 35,142 crore in the previous year.
H-Energy, Kakinada Seaports sign agreement to develop LNG infra
H-Energy, the oil and gas arm of Mumbai-based Hiranandani Group, on Monday said it has entered into a port service agreement (PSA) with Kakinada Seaports (KSPL) for developing a liquefied natural gas (LNG) regasification and reloading terminal at Kakinada port in Andhra Pradesh. H-Energy entered into the PSA with KSPL through its wholly-owned subsidiary, East Coast Concessions (ECPL), it said in a press release. Darshan Hiranandani, chief executive officer of H-Energy in a statement said, “H-Energy is excited to partner with Kakinada Seaports for our East coast project. We believe that Kakinada with its existing breakwater and deep draft combined with its close proximity to various natural gas pipeline makes this an efficient and successful project for our customers, our partners, and ourselves.” ALSO READ: Energy crisis behind Pakistan’s offer for conditional talks with India According to the company, H-Energy will develop an LNG hub at the Kakinada Port catering to the needs of domestic customers in Andhra Pradesh and will supply LNG through small vessels to H-energy’s upcoming Kukrahati LNG terminal in West Bengal and neighboring countries such as Bangladesh and Myanmar. The company is already engaged in developing LNG regasification terminals at Jaigarh on the west coast and at Kakinada and Kukrahati on the east coast of India. According to the release, H-Energy will start commercial operation of its Floating Storage Regasification Unit-based LNG terminal at Jaigarh port in Maharashtra by end of 2019 along with a 60-km natural gas pipeline to Dabhol. The company is also laying a 635-km natural gas pipeline from Jaigarh to Mangalore, which will connect gas customers in Maharashtra and Karnataka. A 242-km natural gas pipeline is also being set-up by the company from Kanai Chhata to Shrirampur (at India-Bangladesh border), which will supply regasified LNG to customers in West Bengal and Bangladesh.
Bangladesh to buy one mn tonnes of LNG on spot market in 2020, lured by price slide
Bangladesh’s state oil and gas company Petrobangla plans to buy more than 1 million tonnes of liquefied natural gas (LNG) on the spot market next year, seeking to capitalise on lower prices for the super-chilled fuel, a senior official said. Asian spot LNG prices are currently seasonally at their lowest in years due to new supply entering the market from the United States, and as demand growth slows in major economies. Petrobangla, in charge of LNG imports into the South Asian country, plans to issue a spot tender some time over January or February next year, said Mohammed Riyadh Ali, director of the Federation of Bangladesh chambers of commerce and industry. The official was speaking to Reuters at the sidelines of an industry conference. Petrobangla will buy eight cargoes of 140,000 tonnes each, or a total of about 1.1 million tonnes, in 2020, he said. According to Riyadh Ali, the purchase will mark Bangladesh’s first spot tender for LNG. “As demand grows, in 2021, we will buy 2 million tonnes of LNG from spot markets,” he said. The nation of 160 million people is expected to become a major LNG importer in Asia, alongside Pakistan and India, as domestic gas supplies fall. Bangladesh currently has two floating storage and regasification units (FSRUs) with a total regasification capacity of 1 billion cubic feet per day – equal to about 7.5 million tonnes a year. Petrobangla already imports about 300-400 million cubic feet per day of LNG – equivalent to 3.5 million tonnes per year in total – through two long-term contracts with Oman and Qatar. “The terminals have space but we don’t want to buy long-term (cargoes) as there are too many cargoes available at cheaper rates,” said Riyadh Ali. “We have already shortlisted 17 parties to participate in tenders,” he said, without identifying potential suppliers.
ADNOC CEO: $11 trillion investment needed to meet future global energy demand
The chief executive of Abu Dhabi National Oil Company (ADNOC) said on Monday that the long-term outlook for energy demand was “robust” and that investment of $11 trillion in oil and gas was needed to keep up with projected demand. United Arab Emirates minister of state and ADNOC Group CEO Sultan Ahmed Al Jaber also told an energy conference in Abu Dhabi that the state oil company was on track to raise oil production capacity to 4 million barrels per day by 2020 and 5 million bpd by 2030.
Austrian energy group OMV sees slowing global oil demand, pickup in M&A
Global oil demand will grow at the slowest pace in many years in 2019 because of a softer world economy, the chief executive of Austria’s OMV said on Monday, predicting that sluggish energy markets will spur mergers and acquisitions in the industry. “There are signals from our consuming markets that our industry should prepare for slower GDP growth. And hence it will translate into tougher days,” Rainer Seele told Reuters on the sidelines of the World Energy Congress in Abu Dhabi. Brent oil prices have been trading at around $60 per barrel in recent weeks, down from their 2019 peaks of $75 per barrel, as slower economic growth outweighed lower oil supplies from sanctions-hit Iran and Venezuela. Seele said he expected growth in global oil demand to fall below 1 million barrels per day this year – for the first time in many years. “And it will continue in 2020,” he said. Softer prices will help rebalance the market as they would prompt higher cost producers, including shale firms in the United States, to adjust their plans: “I see some predictions that U.S. oil production growth may halve soon,” he said. Meanwhile, energy asset prices will also come down. “The industry might need to prepare for consolidation. The M&A market might return to a more healthy mode as assets become more reasonably priced,” said Seele, adding that OMV was for now taking a break on the M&A front.
PM fulfils promise, 8 crore poor families get LPG before deadline
Prime Minister Narendra Modi will on Saturday fulfil, seven months ahead of schedule, his government’s promise to help women in eight crore poor households breathe easy by replacing their smoky ‘chulhas’ (earthen ovens) with LPG connection and stove free of cost. The PM will hand over the connection number eight crore under his government’s transformational social sector scheme – Pradhan Mantri Ujjwala Yojana, commonly referred to as Ujjwala – at a function in Aurangabad, Maharashtra. It was launched on May 1, 2016 at Ballia in UP with a target of reaching five crore households by March 2019. This was later raised to eight crore households by March, 2020. Ujjwala has given Modi the image of a leader who cares for the poor and keeps his promise. It has helped his government connect with the rural masses, particularly women and members of SC/ST households that have received 42% of the connections under the scheme. Politically it is seen to have resulted in handsome electoral dividends for the ruling BJP and its allies, starting with the UP assembly polls that the party swept in 2017. The scheme showcases the Modi government’s prowess in completing projects on time. Ujjwala also transformed the public perception about the oil ministry from being an economic wing of the government and a playground of corporate lobbies to that of the Centre’s social welfare arm. The ministry has come through with flying colours under the watch of Dharmendra Pradhan, who oversaw the operation. The scheme has helped expand the use of LPG as cooking fuel to 95% of population in the country from 55% in May 2014, when Modi began his first term as the PM, and turned India into the world’s second-largest domestic consumer of the clean-burning fuel after China. A recent study indicated LPG use easing chest congestion among rural women by 20%.
Reliance seeks $5.4 minimum price for new gas from KG-D6
Reliance Industries is seeking a minimum price of USD 5.4 per unit for the natural gas it plans to produce from newer fields in the Bay of Bengal block KG-D6 as it changed parameters to suit government policies. Reliance and its partner BP Plc of the UK have sought bids from potential users for the 5 million standard cubic metres per day of natural gas they plan to produce from the R-Cluster Field in KG-D6 block from second quarter of 2020, according to the bid document. Bidders have been asked to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required. Dated Brent means the average of published Brent prices for three calendar months immediately preceding the relevant contract month in which gas supplies are made. It set a floor or minimum quote of 9 per cent of dated Brent price — which means bidders would have to quote 9 or a higher percentage for seeking gas supplies. At USD 60 per barrel price, the gas price comes to USD 5.4 per million British thermal unit (mmBtu). E-bidding would happen on October 10, the bid document said. The rate compares to the government-mandated USD 3.69 rate that its currently producing Dhirubhai-1 and 3 fields in KG-D6 block are getting. The government gas pricing policy, however, provides for a higher cap price for future gas produced from difficult fields like those in deepsea. This cap currently is fixed at USD 9.32 per mmBtu. Reliance and BP are developing three sets of discoveries in KG-D6 block — R-Cluster, Satellites and MJ by 2022. The document said the gas price would be lower of the quoted rate or the government-mandated ceiling for the difficult fields. The formula Reliance is using to price gas for R-Series fields is different from its last price discovery it made for the coal seam gas (CBM) from its Sohagpur coal-bed methane blocks in Madhya Pradesh. For Sohagpur CBM, it had in 2012 sought bids at a benchmarked rate at 12.67 percent of JCC, or Japan Customs-Cleared Crude, plus USD 0.26 per mmBtu. The formula was the same at which Petronet LNG, a joint venture of public sector oil companies, whose chairman is the oil secretary, used to buy long-term liquefied natural gas (LNG) from Qatar. At USD 60 per barrel oil price, CBM from its Madhya Pradesh block was to cost USD 7.8. That formula was, however, rejected by the oil ministry even though 59 valid bids seeking about 70 mmscmd of gas were received in the open tender. It in 2017 changed the formula by seeking bids in the form of a deductible from 12.67 percent of prevailing Brent crude oil price plus USD 0.52 per mmBtu plus USD 0.26 per mmBtu, according to the bid document of CBM pricing. Reliance ended up buying the CBM gas from its block after it bid deducting USD 1.836 per mmBtu, lower than USD 3.156 bid by rival Piramal Glass and USD 3.495 bid by state-owned GAIL.
ONGC planning to complete 27 projects worth Rs 870 billion over 3-4 years
India’s largest oil and gas exploration and production company, Oil and Natural Gas Corporation Limited (ONGC) on Friday said it has 27 projects worth Rs 870 billion which are on stream and will be completed in the next 3-4 years. “As many as 27 projects worth Rs 870 billion are on stream. These projects will be completed in the next 3-4 years. We are on track. We are hopeful that these projects will be completed on time,” ONGC executive director N C Pandey said after attending a meeting with the Department of Economic Affairs (DEA) secretary Atanu Chakraborty and Expenditure Secretary G C Murmu at North Block. On payment issues, he said, it was emphasized in the meeting that endeavors should be made to make payments ahead of the scheduled date. The finance ministry on Friday met CPSEs to boost capital expenditure and ensure quick payments to vendors to tackle the slowdown. ONGC produces around 70 per cent of India’s crude oil (equivalent to around 30 percent of the country’s total demand) and around 62 percent of its natural gas. For Q1 of the current fiscal, ONGC posted a standalone net profit of Rs 59.04 billion, recorded 3.7 percent increase in gas production Q-o-Q. Its gross revenue stood at Rs 265.55 billion in the same period.
HDMC plans to set up 80-tonne biomethanation plant
The Hubballli-Dharwad Municipal Corporation (HDMC) is planning to set up a biomethanation plant with a capacity of 80 tonnes per day at one of its dumping yards under the Union government’s Sustainable Alternative Towards Affordable Transportation (SATAT) initiative. It has requested Union minister Pralhad Joshi to persuade government-owned oil and gas companies to help in the establishment of the plant. HDMC commissioner Suresh Itnal told TOI that the civic body is expecting a confirmation from Joshi, who, he said, has assured all possible help. The civic body has decided to follow the Indore model where biomethanation plants are running successfully. The existing biomethanasation plant with 3-tonnes capacity per day has stopped functioning due to some technical reasons. The civic body made several efforts in the past to generate energy from waste. Some years ago, a team of HDMC corporators and experts visited Pune and got first-hand information about the functioning of the Pune Municipal Corporation’s waste to energy plant to set up a similar one in the twin cities. However, the project did not materialise. HDMC SWM wing executive engineer Vijaykumar R said a state-owned oil and gas company will set up the plant at a cost of around Rs 36 crore. He said compressed bio-gas can be used as an alternative, renewable automotive fuel. Besides, the plant generates compost as an end-product which can be used in agricultural fields. “There is one more possibility. An entrepreneur can set it up and the HDMC earn 50% of his revenue, as we will provide land, water and electricity,” he said. Vijaykumar said the plant can solve the problem of disposing of bulk waste, which is mainly organic waste, generated through bulk waste generators such as hotels, marriage halls and vegetable and fruit markets.
Chevron’s new design for Indonesian gas project to cut output: Regulator
Indonesia’s upstream oil and gas regulator has lowered its peak gas output estimate for the Indonesia Deepwater Development (IDD) project after operator Chevron Corp cut investment due to a change in the facility’s design, a regulatory official said on Thursday. Peak output is now expected to reach around 700-800 million standard cubic feet per day (mmscfd), compared with an initial estimate of over 1 billion cubic feet per day (bcfd), when the remaining two gas hubs start production, Fatar Yani Abdurrahman, deputy chairman of regulator SKK Migas, told reporters. The lower estimate was due to the design change, including using the shallow-water platform instead of deep water, Abdurrahman said on the sidelines of an industry forum. Last year, the government said Chevron planned to halve its investment for the project to $6 billion from $12.8 billion, but targeted production would remain the same at 1.1 million bcfd and 31,000 barrels of condensate. The project began production from the Bangka field in 2016 and Chevron is in the process of developing the Gendalo and Gehem gas hubs off the coast of East Kalimantan. Production from the two gas hubs combined is expected to reach 700 mmscfd, though Bangka’s output has declined, Abdurrahman said. “Now, Bangka production is already depleted to below 100 mmscfd, to around 60 mmscfd,” he said. Chevron and other stakeholders in the project, Italy’s ENI and China’s Sinopec, are in a discussion for a revised plan of development, which they will hand over to SKK Migas for approval. “Now, we’re just waiting for the decision from Chevron and partners. The later they submit it, the project will be more delayed and it will be more costly,” he said. The regulator has pushed Chevron and its partners to speed up their talks so that the project can meet an onstream target of 2024.