Reliance says its main gas fields in KG-D6 block in late life stage
Reliance Industries has said its flagship natural gas fields in the KG-D6 block in the Bay of Bengal are in “a late life stage” with output plummeting to an all-time low. The company, beginning mid-2020, will bring to production three sets of new discoveries in the block that will reverse the years of decline in production. Dhirubhai-1 and 3 — once the country’s highest gas producing fields — are “in a late stage and affected by low pressure and water ingress related challenges,” the company said in an investor presentation post announcing June quarter earnings. The fields produced an average of 1.76 million standard cubic metres per day of gas during April-June, the firm said. RIL has till date made 19 oil and gas discoveries in the Krishna Godavari basin. Of these, MA — the only oil discovery in the block — began production in September 2008. D1 and D3 fields went onstream in April 2009. MA field ceased to produce in September last year and now D1 and D3 are in their last stage. KG-D6 had hit a peak of 69.43 mmscmd in March 2010 before water and sand ingress shut down wells. This peak output comprised 66.35 mmscmd from D1 and D3, the largest of the gas discoveries on the KG-D6 block, and 3.07 mmscmd from MA field. Gas production from MA field hit a peak of 6.78 mmscmd in January 2012. RIL in the presentation said it is now developing three sets of discoveries — R-Cluster, Satellite Cluster and MJ fields in KG-D6 block and these will together produce 30-35 mmscmd of peak output. “R-Cluster development (is) on track for first gas in mid-2020,” it said. “Satellite Cluster on track for first gas in Mid-2021 (and) MJ Development on track for production in Mid-2022.” While all six wells on R-Cluster have been completed and now a second phase of offshore installation activities are planned on the field in Q3 of FY20, for Satellite fields and MJ field all contracts have been awarded, it said. RIL is the operator of the block with 60 per cent interest while BP holds 30 per cent stake. Niko Resources of Canada has the remaining 10 per cent but it has defaulted on payments, triggering the process of assignment of its interest to RIL and BP. “Assignment of Niko’s PI (participating interest) to RIL and BP is in progress,” the company said in the presentation. MJ gas find is located about 2,000 metres directly below the currently producing D1 and D3 fields and is estimated to hold a minimum of 0.988 Trillion cubic feet (Tcf) of contingent resource. Besides MJ-1, four deepsea satellite gas discoveries — D-2, 6, 19 and 22 — are planned to be developed together with D29 and D30 finds on the block. The third set is the D-34 or R-Series find. Other discoveries have either been surrendered or taken away by the government for not meeting timelines for beginning production.
Oil Ministry eyes Rs 6,000-crore viability gap funding for Northeast gas grid project
The oil ministry will soon approach the Cabinet for about Rs 6,000 crore in viability gap funding (VGF) for the proposed gas grid in the northeast. Indradhanush Gas Grid Ltd (IGGL), a joint venture of Indian Oil, ONGC, GAIL, Oil India, and Numaligarh Refinery, plans to lay 1,600-kilometre northeast gas grid at a cost of about Rs 10,000 crore. IGGL would need about 60% funding support from the central government for this, an official said. Without funding support from the Centre, state firms will find it hard to launch the project, the official said, adding that the project was crucial to building the national gas grid and the economic development of the northeast region. The government had in 2016 provided a capital grant of Rs 5,176 crore, or 40% of the project cost, for 2,500-km-long Jagdishpur-Haldia and Bokaro-Dhamra Gas Pipeline (JHBDPL) project, which GAIL is currently executing. A higher 60% project funding support from the Centre would be needed for the northeast gas grid project since it is tougher than Jagdishpur-Haldia project due to the physical and economic conditions in the region, the official said. Indradhanush Gas Grid was set up in August 2018 but has not made much progress in a year due to lack of clarity on project financing. The oil ministry had earlier hoped to receive the Cabinet’s approval on funding ahead of the general election but the process got delayed. Delay in funding can affect the timelines and cost of the project that connects eight states of Assam, Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland, Tripura, and Sikkim. The pipeline would connect to the proposed national grid at Guwahati. At present, about 16,800 km of the natural gas pipeline is operational and about 14,200 km of pipelines are being developed across the country to increase the supply of gas to households and industries. The government plans to raise the share of natural gas in the country’s primary energy mix to 15% by 2030 from 6% now. In its quest to turn India into a gas-based economy, the government is encouraging companies to build more gas pipelines, import terminals, and compressed natural gas distribution stations. Increased transport and distribution infrastructure and production capability can boost local consumption of natural gas, which is a relatively cleaner fossil fuel.
Pakistan receives 4 international bidders for shipment of LNG
Energy-starved Pakistan has received four bids from international bidders for the shipment of Liquefied Natural Gas for a 10-year period, officials said on Friday. Pakistan LNG Limited (PLL), a government entity mandated to procure Liquefied Natural Gas (LNG), floated a tender in June inviting international suppliers to make offers to bring LNG. PLL tender showed that the successful bidder would supply 240 LNG cargoes of 140,000 cubic metres each for delivery over a 10-year period for the country’s second LNG terminal which can receive 600 million cubic feet per day (mmcfd) of natural gas. The officials in the company told that Italy’s Eni, Azerbaijan state oil company SOCAR, PetroChina International Singapore, a unit of PetroChina Co Ltd and global trading house Trafigura filed bids by the last date of July 18. “We will award the contract to the lowest bidder in a transparent manner,” said an official. He said the contract will be finalized by August and the successful company would make the first delivery of LNG between September 2019 and March 2020. The contract would be between USD 5 billion to USD 6 billion and is being billed as one the biggest in the LNG shipment sector. Currently, Pakistan has a 15-year contract with Qatar for the supply of LNG. The contract was finalized when Shahid Khaqan Abbasi was minister for petroleum in 2016. Abbasi was arrested on July 18 for alleged corruption in the award of the contract. He has denied the allegations. A Pakistani court on Friday sent former premier Abbasi on a 13-day remand to the country’s anti-graft body, probing a case of alleged corruption of multi-billion-rupees in awarding an import contract of the LNG from Qatar. The Officials said that the current government would ensure transparency in the contract to avoid criticism by the opposition. Pakistan faced acute energy shortages until LNG supplies from Qatar began after contract which helped to address the problem. But its demand is increasing, creating pressure for a bigger and efficient supply chain.
AG&P sells minority stake to Japanese investors for $100 million
Atlantic Gulf and Pacific company of Manila (AG&P) today announced it has sold a minority stake to Japanese investors in a deal worth $100 million. The capital will be used to execute multiple global LNG initiatives including major projects in India. Under the deal, Osaka Gas, through its affiliate Osaka Gas Singapore (Osaka Gas) and the Japan Bank for International Cooperation (JBIC) have invested in a minority stake in AGP International Holdings. Commenting on the development, AG&P Chairman Jose P Leviste Jr said Osaka Gas and JBIC have expertise and experience in their respective fields. “We have a great responsibility to work very hard for them and our other shareholders to continue to grow AG&P’s unique business model that captures a large portion of the LNG value chain after the molecule has been shipped,” he said. The projects targeted to be implemented with the funds include AG&P’s City Gas Distribution business in India, where the company has won long-term, exclusive concessions to connect millions of people to compressed natural gas (CNG) for their vehicles and piped natural gas (PNG) directly into their homes across South India and Rajasthan. The funds will be utilized also for small and medium-scale LNG import terminals, such as AG&P’s pending terminals in Karaikal, India and elsewhere, that will provide the link to bring commercially attractive, convenient and safe gas to population centers that today rely on dirtier and more expensive fuels. The company said it would also invest in “LNG applications and logistics, such as LNG delivery to end-customers by different transportation options; and additional intellectual property that has made AG&P and its family engineering company, Gas Entec, leaders in the design, build, testing and commissioning of LNG bunkering vessels, floating storage and regasification (FSRUs, FRUs, FSUs and onshore variations) and LNG, dual-fuel applications for ships and other vehicles.” Other projects include modularization and field construction services to serve global energy and commodity markets in the US, Australia, the South Pacific and Southeast Asian markets and rapidly accelerating domestic infrastructure in the Philippines, where AG&P owns and operates two-yard facilities, employing 4,000 people. Osaka Gas is a 114-year old, vertically-integrated energy utility in Japan with revenue of $12 billion. It supplies natural gas to 5.5 million households and operates over 60,000 km of pipeline, in addition to a wide-range of gas, power and renewable assets around the world, including in the US, Europe, and Southeast Asia. Osaka’s investment in AG&P is expected to help both the parties work together to develop LNG infrastructure projects in South Asia, Southeast Asia and the Americas, among others. JBIC is an institution wholly-owned by the Japanese government with over JPY 16 trillion of debt, equity and guarantees extended in its global portfolio, as of March 31, 2019, intended to support Japanese industry and Japan’s strategic priorities. Its investment in AG&P was made, in line with its policy objectives to support Osaka Gas’ ongoing collaboration with AG&P in expanding its overseas business.
Ministry has instructed GAIL to split its gas marketing and transmission business: Pradhan
Oil and steel minister Dharmendra Pradhan on Tuesday said the oil ministry has instructed government-owned natural gas utility giant, GAIL, to form a plan to separate its gas marketing and transmission businesses. “Marketing and laying of pipelines or transmission are two different segments, the ministry has always been of the opinion that these two job functions being done by GAIL should be separated. Yes, we have told them to prepare a road map for this,” Pradhan told media yesterday. He added that as of now no timeline on the split has been decided. According to a news report by Bloomberg earlier this week, the oil ministry had approached the Cabinet for splitting the two businesses. Meanwhile, GAIL has appointed an international consultant to determine tax implications after the restructuring. The news report further added that the plan to carve the pipelines business into a fully-owned unit would bring greater transparency between the two businesses and might allow the government to sell shares at a later date. Many private, as well as government-owned companies, have in the recent past voiced concerns about GAIL being present in both the marketing and transmission business. D K Sarraf, chief of Petroleum and Natural Gas Regulatory Board (PNGRB), the country’s downstream regulator, in a recent interview told ETEnergyWorld that GAIL’s unbundling will resolve certain operational issues. “The government needs to take a call on it. Yes, there is a legitimate concern among many stakeholders on GAIL’s operation both in the marketing and transporting business. The government will have the final say in this and stakeholder inputs will obviously be taken. Yes, certain operational problems will be resolved by unbundling.” Sarraf told ETEnergyWorld. Ajay Shah, vice-president at Shell Energy Asia had earlier this year told ETEnergyWorld that for India to unlock its natural gas potential and increase its consumption the country would have to unbundle natural gas transmission and marketing services. “Countries like the US and Europe were able to increase the use of natural gas in their overall energy mix primarily due to unbundling of natural gas marketing and transportation services. While India does have open access to its pipeline and a regulator in place, the practical reality is that it is difficult to access natural gas pipeline infrastructure for a variety of reasons,” Shah told ETEnergyWorld in an interview. Last year, many companies had in their response to PNGRB’s proposal on unified tariff for inter-connected cross country pipelines had again raised concerns on GAIL’s operations. Indian Oil, Shell Energy Marketing and Trading as well as BP India were of the opinion that unification of tariff should only be done after legal unbundling of gas trading and transmission business has taken place and an Independent System Operator is set-up. GAIL in response to these concerns had said that unbundling was not related to the unification of tariff, which was a separate exercise and should be implemented on a standalone basis.
Canadian LNG plant signs Chinese supply contract
A small-scale Canadian liquefied natural gas (LNG) plant has signed the country’s first binding supply agreement with China, ahead of much larger deals expected to be finalized with operators of bigger new terminals. Privately-owned FortisBC agreed with China’s Top Speed Energy Corp to supply 53,000 tonnes from its Tilbury facility in British Columbia as of 2021 for two years. The deal is small but is a sign of things to come. Terminals with an export capacity of 24 million tonnes a year (mtpa) are planned in British Columbia by Royal Dutch Shell, Chevron and Pacific Oil & Gas, targeting Asian buyers. “There is strong demand for Canadian LNG in China and this is an exciting time to be working in the industry here in B.C,” said Douglas Stout, FortisBC vice president of market development. The company has supplied small-scale cargoes on a spot basis to China since a pilot in 2017. Singaporean Pacific Oil & Gas has signed non-binding contracts with Chinese buyers CNOOC for 0.75 mtpa for 13 years and Guangzhou Gas Group for 1 mtpa for 25 years from its planned Woodfibre LNG export terminal, also in British Columbia. PetroChina, meanwhile, is an equity holder in the large 14 mtpa LNG Canada export facility being constructed by Shell. Canadian LNG supplies to Asia have become an attractive proposition in light of China’s growing appetite for the fuel and British Columbia’s proximity across the Pacific, compared with the U.S. Gulf Coast, where far more LNG terminals are being built.
Ethanol to be central issue in India-Brazil meeting: Industry group
Brazil and India are expected to sign a memorandum of understanding on production and trade of ethanol when leaders of the two countries meet in Brasilia later this year, an industry group said on Tuesday. According to UDOP, a Brazilian association of sugar and ethanol producers, the suggestion to discuss a partnership on ethanol came from the Indian government, which has a target to gradually increase blending of ethanol to gasoline to up to 20%. Indian Prime Minister Narendra Modi was reelected in May and will make an official visit to Brazilian President Jair Bolsonaro in November. Bolsonaro posted messages on Twitter congratulating Modi and expressing intentions to boost ties with India, particularly in trade. Modi and Bolsonaro later met during the G20 summit in Osaka, Japan at the end of June. UDOP said, citing information from the energy department in Brazil’s foreign relations ministry, that Bolsonaro’s government plans to help India to boost ethanol production and open the Indian market for the biofuel, helping to expand global use of ethanol. Brazil is the second-largest ethanol maker after the United States. Large-scale use of ethanol takes place only in those two countries, basically, despite efforts in the past to make ethanol an internationally traded commodity. Despite the positive tone for November’s meeting, Brazil is fighting India in the World Trade Organization because of sugar export subsidies. India has surpassed Brazil as the world’s largest sugar producer as it gives financial help to cane producers and sugar mills, a stimulus that is hampering a potential price recovery in the depressed global sugar market. India has been providing transport subsidies of between 1,000 rupees ($14.59) a tonne to 3,000 rupees a tonne to sugar mills, depending on the distance to ports. The government has also raised the amount it directly pays to cane growers to 138 rupees a tonne in assistance from 55 rupees a year ago. India has no intention of halting the subsidies, Reuters reported on Monday. But using more cane in India to produce ethanol, instead of sugar, could reduce the global supply of the sweetener, as Brazil has been doing for the last two seasons with cane allocation to sugar production hitting a record low of 35% in 2018-19.
Reliance, BP spending $5 bn on three gas projects in KG-D6 block: Bernard Looney, BP
BP, British oil and gas firm, and Mukesh Ambani-led Reliance Industries (RIL) are collectively spending $5 billion to execute three gas development projects in the Krishna-Godavari (KG) basin, said Bernard Looney, BP’s chief executive (upstream), on Tuesday. “Strong relationship between BP and reliance is another great example of what can be achieved by working together at scale. Together we are spending up to $5 billion to execute three gas development projects in the KG-D6 block and together we are expected to bring about one billion cubic feet per day of new domestic gas on stream by 2022,” said Looney. RIL and BP had last month announced the sanction of the MJ project, also known as D55, in Block KG D6. MJ would be the third of three new projects in the Block KG-D6 Integrated Development Plan. The approval follows sanctions for the development of ‘R-Series’ deep-water gas field in June 2017 and for the satellites cluster in April 2018. Together the three projects are expected to develop a total of about three trillion cubic feet of natural gas. He added that the companies’ hope to unlock a new offshore base in Odisha and are currently working in the Mahanadi basin to explore ways of both economically developing discoveries and building a pipeline of exploration and development opportunities. “As partners, we are delighted to also win the new KG-UDW1 block, which is located adjacent to our existing KG-D6 block and within a reasonable time and distance of the existing infrastructure, it, therefore, provides additional resources to extend the production profile for the KG-D6 facilities,” Looney said. BP exploration and RIL had also won an ultra deep-water offshore block in the KG basin under the latest Open Acreage Licensing Programme. According to Looney, India as per the current trends will overtake China as the largest growth market for energy in the mid-2020s and according to BP’s energy outlook, the country’s primary energy demand will increase two-and-a-half times till 2040. “India has a natural gas base with a potential to meet 50 percent of anticipated demand for gas through to 2050. Natural gas burns at half of the emission of coal for power generation and offers significant benefits for air quality. In renewables, there are large untapped solar and wind resources with a potential to be utilized at a cost which is increasingly competitive with hydrocarbons,” Looney said. According to BP’s 2018 annual report the company has participating interest in two oil and gas blocks (KG-D6 30 percent and NEC25 33.33 percent) both operated by RIL. BP also has a stake in a 50:50 joint venture (India Gas Solutions) with RIL for the sourcing and marketing of gas in India.
European gas prices exceed Asian spot LNG, shuts arbitrage
European gas hub prices have risen above the price of liquefied natural gas (LNG) on the Asian spot market in a rare occurrence that largely rules out arbitrage of LNG cargoes from the Atlantic to the Pacific basins. Dutch and British month-ahead gas prices exceeded Asian spot LNG in April for the first time in four years. Asian LNG prices tend to be higher due to the huge demand there with few alternative supplies. The switch in the price values is another twist in a unique year for the fast-expanding commodity as soaring production from new plants, much of it in the U.S. Gulf Coast, coincides with tepid demand from Asia, normally consumer of 75% of global LNG. Month-ahead Dutch gas was $4.56 per million British thermal units (mmBtu) and the British equivalent was $4.48 per mmBtu by 1315 GMT on Monday, while Asian spot LNG for August was heard at $4.40 per mmBtu. The arbitrage, whereby Atlantic Basin LNG – including from the U.S., Russia and West Africa – headed for Europe instead travels the longer distance to Asia to fetch a higher price, has been largely closed for most of the year. That is because the spread has rarely exceeded the extra cost of shipping – broadly defined as a dollar per mmBtu. Forward price curves moreover indicate the situation is unlikely to change until at least October. When the Japan/Korea Marker (JKM) for the months of August, September and October is compared to the Dutch Title Transfer Facility (TTF) forward prices, the spread is below $1 per mmBtu. For October, it is 46 cents and was as low as 28 cents. The JKM is a benchmark published by commodity pricing agency S&P Global Platts and Asia’s main LNG pricing benchmark for the spot market. Dutch and British month-ahead gas prices soared this month in part due to a string of planned outages in Norway, although their 38% to 44% gains in the past two weeks have not fully reversed the prolonged 66% percent fall since last October. The rise has, nevertheless, given a breather to European suppliers that had contracted to buy U.S. LNG by widening the spread with the U.S. Henry Hub gas price. At one point last month the spread did not cover shipping costs. With U.S. production the largest source of increased supply in the past year, Europe’s ability to absorb excess LNG is being tested. Europe has long been seen as the industry’s “destination of last resort” due to its flexible continent-wide markets.
BPCL buys gasoline for Kandla in rare move
India’s Bharat Petroleum Corp Ltd has bought gasoline for Kandla in a rare move to meet demand and plug a supply gap after cancelling an earlier purchase tender, industry sources said on Tuesday. BPCL bought 20,000 tonnes of 91.2-octane grade gasoline at a premium of about $9 a barrel to Singapore quotes on a cost-and-freight (C&F) basis. The fuel is of Euro IV-compliant grade and scheduled for July 18-22 arrival at Kandla port located in Gujarat state of western India. BPCL had previously cancelled a tender to buy 35,000 tonnes of gasoline for June 20-24 arrival at Mumbai but the reasons were unclear. India is undergoing heavy refinery maintenance this year as the country prepares for cleaner fuels from April 2020. This is coming at a time when motorists in India are increasingly turning to gasoline-powered vehicles and away from diesel-driven automobiles.