Petrobras delays delivery of bids for LPG unit to next week
Brazil’s state-controlled oil company Petroleo Brasileiro SA has delayed until next week the delivery of binding proposals for its liquefied petroleum gas (LPG) distribution unit Liquigas, a source with direct knowledge of the matter told Reuters. Petrobras, as the firm is known, decided to delay the offers after interested parties asked for more time to conduct due diligence on the unit, said the source, who requested anonymity as the matter is private. Liquigas is one of dozens of assets Petrobras has put up for sale in a massive divestment drive aimed at reducing debt and sharpening the company’s focus on deepwater oil exploration and production. Petrobras has already signed deals for about $12.8 billion of divestments this year. This week, Reuters reported that groups led by Brazilian investment firm Itausa Investimentos SA, Abu Dhabi state investor Mubadala and SHV Energy of the Netherlands were expected to submit binding proposals for the unit. Liquigas is expected to fetch between 2.5 billion and 3 billion reais ($757 million), Reuters reported. Newspaper Valor Economico first reported on the delay. The newspaper, citing people familiar with the matter, said the new date for bids was Aug. 16. Petrobras did not immediately respond to a request for comment.
Lower spot LNG may push India’s top gas importer to renegotiate deals
India’s top gas importer Petronet LNG will consider renogiating its long-term supply deals to secure lower liquefied natural gas (LNG) prices if spot prices remain weak for two to three years, its managing director said on Thursday. An inexorable decline in spot market prices for LNG is driving some buyers in Japan and China to request delays in term cargoes, while others are looking to lift lower volumes under their term contracts from LNG sellers. “There is no doubt. We have to be sensitive to the international market. If spot prices continue to be low for 2-3 years then you don’t have much of a choice, and there would be a case to look at renegotiation,” Prabhat Singh told Reuters. Petronet has a deal to buy 7.5 million tonnes of LNG annually from Qatar’s Rasgas and 1.44 million tonnes from Exxon’s Gorgon project in Australia. The Indian company is buying gas under these deals at $8.25-$9.50 per million British thermal units, he said, while spot LNG prices are around $4/mBtu. Petronet previously renegotiated pricing of the Australian deal in 2017 and with Rasgas in 2015. Singh also said there was a gradual shift to pricing long-term gas purchase deals off spot price indices rather than crude oil prices. India wants to raise the share of gas in its energy mix to 15% in next few years from 6.5% currently.
U.S. natural gas demand is at a record and prices keep dropping
U.S. gas futures this week collapsed to a three-year low, while spot prices were on track to post their weakest summer in over 20 years. In other markets, such lackluster pricing would cause investment to retrench and supply to contract. But gas production is at a record high and expected to keep growing. Demand is rising as power generators shut coal plants and burn more gas for electricity and as rapidly expanding liquefied natural gas (LNG) terminals turn more of the fuel into super-cooled liquid for export. Analysts believe the natural gas market is not trading on demand fundamentals because supply growth continues to far outpace rising consumption. Energy firms are pulling record amounts of oil from shale formations and with that oil comes associated gas that needs either to be shipped or burned off. On the New York Mercantile Exchange, gas futures this week dropped to $2.03 per million British thermal units (mmBtu), the lowest since May 2016. For the summer, spot gas prices at the Henry Hub benchmark in Louisiana were on track to fall to their lowest since 1998. Gas speculators last week boosted their net short positions to the highest on record, according to the U.S. Commodity Futures Trading Commission. “All the bulls are gone,” said Kyle Cooper, consultant at ION Energy in Houston. The market is expecting a big boost in gas output this fall after Kinder Morgan Inc’s Gulf Coast Express pipeline comes online in September and releases some of the gas currently stranded and being burned in the Permian. So much associated gas is coming out of the ground that gas prices in the Permian basin in Texas and New Mexico, the biggest U.S. shale oil formation, have turned negative on multiple occasions this year. Meg Gentle, CEO of U.S. LNG company Tellurian Inc, said current pipeline expansion plans will not meet record gas production in the Permian, leading to severely depressed prices at the Waha Hub in West Texas, which touched a record low of negative $9/mmBtu in April. “Negative $9. I’d be happy taking it all for $1,” Gentle said earlier this year at a conference. Tellurian is developing the Driftwood LNG export plant in Louisiana and pipelines to transport gas from fields like the Permian to the Gulf Coast. GRAPHIC: Waha prices turn negative: https://tmsnrt.rs/2GTjcvu The rising production has offset a nominally bullish factor like persistently low inventories. While recent declines in oil and gas prices have prompted energy firms to cut spending on new drilling, a drop in production growth is still considered far away. The U.S. Energy Information Administration projects gas production will rise 10% to 91 billion cubic feet per day in 2019 after soaring 12% to a record 83.4 bcfd in 2018, its biggest annual percentage increase since 1951. One billion cubic feet is enough gas to fuel about five million U.S. homes for a day. GRAPHIC: Falling gas prices: https://tmsnrt.rs/2YR4o6K LNG ISN’T ENOUGH U.S. LNG exports, particularly to Asia, are powering increased demand. They are expected to rise from a record 3.0 bcfd in 2018 to 6.9 bcfd in 2020, according to EIA projections, making LNG the nation’s fastest-growing source of demand. Still, LNG exports account for only about 5% of total U.S. gas use. “LNG is still not a significant enough portion of the consumption pie to independently push prices higher,” said Jim Ritterbusch of Ritterbusch and Associates of Galena, Illinois. Meanwhile, U.S. power generators’ gas use may be peaking, rising to an expected record 30.6 bcfd in 2019 but then falling to 29.6 bcfd in 2020 as renewables produce more electricity, EIA data shows. Daniel Myers, a market analyst at Gelber & Associates in Houston, said “persistent low prices are beginning to crimp producers’ growth expectations” in gas-heavy shale formations such as the Marcellus in Pennsylvania or the Haynesville in Texas, Louisiana, and Arkansas. But the sheer volume of gas produced in oil-heavy plays like the Permian means that supply could remain robust. “Production in the Permian is nearly entirely oil-driven and independent from gas prices,” said Myers.
Adani plans to invest Rs 10,000 crore in city gas distribution networks
Adani Gas, the city gas distribution (CGD) arm of Adani Group, looks to invest close to Rs 10,000 crore in the 15 geographical areas (GA) it won in the ninth and 10th rounds of CGD bidding. The company also looks to advance work on the Gujarat and Rajasthan GAs. “In the ninth and 10th rounds, we won 15 GAs. One of these — close to Faridabad — has already gone into operation. Another should get operational soon,” said Suresh Manglani, chief executive officer, Adani Gas. The company added it has so far spent Rs 400 crore on these GAs and placed vendor orders. “Full investment in the GAs over eight years will be Rs 10,000 crore,” said Manglani, in a post-earnings media call on Wednesday evening. For the April-June 2019 quarter, Adani Gas reported a profit after tax of Rs 79 crore, 43 percent higher from the Rs 55 crore in the same quarter a year ago. As part of the strategy, the company also looks to complete 50 kilometres (km) of pipeline network in the first year of the bid awards. “We will look to advance the pipeline laying in most of the GAs by four to five years, so we can monetise the GA earlier,” Manglani added. Both the ninth and 10th rounds of city gas bids are expected to see around Rs 1.2 trillion investments in India by March 2029. In addition, Adani will also look to focus on certain western regions. “Our main focus is early monetisation of the Gujarat GAs and we push for the Rajasthan GA, specifically Udaipur,” said Manglani. In August 2018, the Petroleum and Natural Gas Regulatory Board issued a letter of intent to 18 successful bidders for 48 GAs. Adani Gas won 11 areas through joint ventures (JVs) and six single bids in the ninth round. In the 10th round, Adani Gas won two GAs and Indian Oil Corporation (IOC)-Adani Gas JV won an additional GA. Adani, along with its JV partner IOC, is authorized to distribute gas in 38 GAs and is currently operating a CGD network in 13 locations together with IOC. The company is confident that gas-pricing changes will not be a concern for its operations. “There is a well-laid-out government policy for administrative price mechanism gas and that has been formulated very well,” said Manglani. He added, “For compressed natural gas (CNG), we source gas from very competitive sources, through a mix of one-year contracts and spots. We look to continue with the same strategy for gas sourcing.” With the completion of the 10th CGD bidding round, CGD would be available in 228 GAs comprising 402 districts spread over all the states and Union territories, covering approximately 70 percent of India’s population and 53 percent of its geographical area. According to the commitment made by various companies during the 10th round, 20,292,760 domestic piped natural gas connections and 3,578 CNG stations for the transport sector would be installed largely during a period of eight years up to March 2029, in addition to the 58,177 inch-km of steel pipeline.
Equinor’s power and gas trading unit expands to the United States
Danske Commodities, a power and gas trading firm owned by oil major Equinor, has expanded its operations to the United States, completing its first trade on the PJM wholesale power market, it said on Thursday. The trade, which Danske Commodities called a milestone, extended the company’s reach to 39 countries and was part of a strategy to expand globally, adding to the European and Australian markets that the firm is currently active in. “The price drivers are very similar to those in our current core markets, and that also applies to risk and return characteristics, so there is a good fit with our business model and capabilities,” Danske’s Chief Executive Helle Oestergaard Kristiansen said. The firm did not disclose the size of the initial trade. Danske has taken over Equinor’s third-party gas trading, downstream gas storage positions and power trading activities including certificates trading as well as balancing and optimization of Equinor’s growing portfolio of renewable assets. PJM is the largest wholesale power market in the United States and is covering 13 states in the Eastern Interconnection, Danske added.
Japan’s Tohoku Electric seeks LNG cargo for Aug-Sept
Japan’s Tohoku Electric Power is seeking a liquefied natural gas (LNG) cargo for delivery over late August to September, two industry sources said on Thursday. The tender closed on Aug 7 but it was not immediately clear if the tender had been awarded, the sources added.
ONGC spending Rs 83,000 cr to execute 25 projects: Shashi Shanker, Chairman
Oil and Natural Gas Corporation (ONGC), the country’s largest oil and gas producer, is currently executing 25 exploration and production (E&P) projects worth Rs 83,000 crore to monetize about 180 million tonne of oil equivalent (MMToe), said ONGC’s Chairman Shashi Shanker, in their Annual Report 2018-19. The company plans to spend close to Rs 32,920 crore in the financial year 2019-20 (FY20), a 12 percent jump in spending as compared to Rs 29,449 crore spent in the previous financial year. “As many as 25 projects, with an estimated outlay of around Rs 830,000 million, are currently under execution, of which 15 would directly contribute to hydrocarbon production. Envisaged cumulative oil and gas gains from these projects through their lifecycle stand at over 180 MMtoe,” said Shanker. According to Shanker, the company completed 10 E&P projects in 2018-19 at the cost of Rs 11,258 crore and besides focussing on ramping up production through the development of greenfield projects, the company also plans to focus on ramping up production from the existing portfolio of mature fields. The upstream giant expects 190 million tonne of incremental oil production from 29 enhanced oil recovery (EOR) projects. Moreover, one-third of the company’s standalone crude oil production in the current financial year came from EOR projects. “There is significant scope to increase production through EOR technologies in the mature fields. ONGC has been a pioneer in the implementation of EOR technologies in India both in onshore and offshore fields. Presently, EOR projects contribute 9 percent of total onshore production,” Shanker said. The company is currently implementing various EOR projects in the company’s oil and gas assets in Gujarat, Assam, and Mumbai. The company drilled 516 wells in the last financial year, consisting of 105 exploratory wells and 411 development wells. According to Shanker, the company is following a roadmap to strategically brand itself as an ‘energy’ company and not just an oil and gas producer. “The ONGC Board recently approved the business roadmap for the company and its other group entities – ‘ONGC Energy Strategy 2040’. It envisions ONGC as ‘A diversified energy company with a strong contribution from non E&P businesses; 3x revenues and ~5x to 6x market capitalization’. It aims to transform ONGC into a future-ready energy entity, one that positions itself well to respond to the challenges and opportunities of tomorrow’s energy scene,” Shanker said. ONGC had earlier in June this year invited partners to help the company enhance production from 64 marginal fields. The announcement came on the back of increased pressure by the government on the company to increase production profile from nomination blocks. The government had shelved proposals to farm out or privatize ONGC fields twice in the past five years, according to a recent report by news agency PTI. The proposal was a result of the continued drop in production. ONGC’s crude oil production in FY19 from its nomination fields fell to its lowest level in 16 years; from a high of 26,485 thousand metric tonne (TMT) recorded in 2004-05 to 21,042 in 2018-19. The worrisome trend is mainly attributed to drop in output from nearly all the offshore and onshore blocks in ageing fields.
India’s HPCL plans to shut secondary some units at refineries in 2019-20
India’s state-run Hindustan Petroleum Corp plans to shut some secondary units at its Mumbai and Vizag refineries in the current fiscal year in order to be able sell Euro-VI compliant fuel from April, its chairman M. K. Surana said on Wednesday. The refiner plans to shut units that improve gasoline specs and a diesel hydro desulphuriser at its 166,000 barrels per day (bpd) Vizag refinery in southern India from early September to the end of October for upgrades, he said. HPCL also plans to shut a gasoline deslphuriser at its 150,000 bpd Mumbai refinery in the western state of Maharashtra for 15-20 days in December, he added. The refiner had shut a 70,000 bpd crude unit at the Mumbai refinery in April for 23 days, he said, adding the company has no further plans to shut crude units at its two refineries in 2019/20.
India to relax rules for entry into fuel retail sector: Source
India is set to relax rules for setting up fuel stations after almost two decades, in a move expected to allow companies like Saudi Aramco, Total and Trafigura to gain a foothold in a sector dominated by state-run entities. The new rules – suggested by an expert panel – mirror those in developed nations like the United States and Britain, and would allow convenience stores, shopping malls and hypermarkets to sell fuels if they are eligible, said an oil ministry source. The government panel has recommended allowing marketing rights for sale of gasoil, gasoline and aviation fuel to companies with a net worth of 2.5 billion rupees. India, where fuel demand is expected to rise in the coming years, has turned into a lucrative market after the government removed controls on retail pricing of gasoline and gasoil. Global players, however, faced difficulties in getting a foothold as they need to commit investment of 20 billion rupees ($272 million) in India’s oil and gas sector to get fuel marketing rights. The cabinet is expected to approve the proposal in four to six weeks, said the source, who declined to be named because they are not authorised to speak to media. India’s oil ministry did not respond to an email seeking comment. DIFFICULT TO SURVIVE India has emerged as a key driver of global oil demand. The International Energy Agency expects the South Asian nation to account for a quarter of global energy use by 2040. Companies including Reliance Industries, RoyalDutch Shell and Nayara Energy, part-owned by Russian oil major Rosneft account for about 10% of the 64,625 fuel stations in the country, according to data posted on the Petroleum Planning and Analysis Cell. “For a new player, it is very difficult to survive as most of the ROs (retail outlets) are owned by state-run companies. We want to provide enabling the environment to have greater competition,” said the source. The new rules will help trader Trafigura’s downstream arm Puma Energy, which had applied for a license last year to sell auto fuels in India. Subsidiaries and joint ventures of companies with existing fuel retailing licenses need to apply again for the marketing rights, according to the panel’s suggestions. This would mean the joint venture of Reliance Industries and BP announced on Tuesday will need a license from the government to start fuel retailing in the country. The new rules would also allow companies to directly sell fuel to industries without setting up retail fuel stations. Companies must set up 5% of proposed retails outlets in rural areas within seven months of winning authorization, the panel recommends.
Slowdown enters oil track: Oil consumption, imports decline
The oil sector seems to be latest addition to the list of sectors facing stress due to the ongoing economic slowdown. For the first time in many months, both oil demand and imports have witnessed a sharp fall indicating that the poor health of the economy has now begun impacting a sector where the country has to rely a lot on imports. As per the latest Oil Ministry data, crude oil imports decreased by 13.4 percent and 2.2 percent during June 2019 and April-June 2019 respectively as compared to the same period of the previous year. During the first quarter as well, the country’s oil demand was lower by 0.2 percent than that a year ago with the fall sharper in June at 1.7 percent. Though the slowdown in oil imports in a country that spends its foreign exchange to buy crude oil should be welcomed, yet it is reflective of the poor demand scenario that has slowed oil imports by refineries. The refineries are using their inventories to meet domestic supplies of petroleum products rather than buying additional quantities of crude oil from overseas even though buying at this juncture would be beneficial with international crude prices at a low of $64-65 a barrel. “It is surprising that oil imports have fallen when global prices are stable and low. This means that consumption has declined and demand is not picking up. The sector has begun to feel the pain of an economic slowdown that several of the consuming industries such as automobiles are already facing,” said an executive of Indian Oil Corporation asking not to be named. Though it is difficult to derive a conclusive relationship between oil imports/sales and economic activity, analysts are unanimous that the current contraction is the result of a slowdown. Otherwise, sales of petroleum products should not have fallen when per capita consumption has been growing. As per the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, except for petrol (10.8 percent) and diesel (1.4 percent), sales of industrial, aviation and kitchen fuels have fallen. Total LPG consumption recorded a de-growth of 7.1 percent during June 2019 and a cumulative de-growth of 1.5 percent during April-June 2019, even though the government’s Ujjwala scheme is fast expanding the reach of cooking gas to the remotest corners of the country. Even kerosene consumption registered de-growth of 17.2 percent in June 2019 compared to 12.1 percent de-growth in June 2018. All is not good on the oil exports front as well with exports of petroleum products decreasing by 11.4 percent during June 2019 as compared to the same period of the previous year. A decrease in petroleum product exports during June 2019 was due to decrease in all exports. Production of petroleum products too saw a de-growth of 9.3 percent and 2.4 percent during June 2019 and April-June 2019 respectively as compared to the corresponding period of the previous year.