Big ambitions for small-scale LNG bunkering
Limited LNG bunkering infrastructure has long been blamed for holding back the shipping industry’s adoption of LNG as a fuel. It’s a textbook chicken-and-egg problem: Fleet operators won’t switch to gas if they cannot be confident of supply, while suppliers won’t invest if they don’t see sufficient demand. Avenir LNG – a spin-off of Stolt-Nielsen Gas – thinks it has found a way to crack the problem and make small-scale LNG distribution to ports not served by pipelines a reality. Closing the LNG supply gap As a long-standing chemical logistics business Stolt-Nielsen has established an integrated network of ships, terminals and distribution channels for transporting chemicals to every corner of the globe. However, there are virtually no such integrated networks established for the distribution of LNG, which makes it difficult to transport gas cost effectively between suppliers and customers – particularly when relatively small volumes and remote or unfrequented locations are involved. Alongside land-based energy customers and industrial concerns such as power generation, smelters and chemical plants, these cases of stranded demand include a steadily growing number of ship operators that would use LNG as a fuel if only they could be sure about availability of supply. Stolt-Nielsen saw this situation as a challenge waiting to be solved and a commercial opportunity. Adapting existing sources In 2017, Stolt-Nielsen formed Avenir – a separate entity dedicated to providing LNG to markets lacking ready access to pipelines. Andrew Pickering, CEO Avenir LNG Ltd, explained the rationale: “The business of large-scale LNG distribution is sewn up. There are well-established trades linking major suppliers and major customers, and the market incumbents have little appetite to complicate their operations extending their reach and catering for smaller customers. “When we examined the dynamics of the small-scale market, we discovered it closely replicated what we were already doing. We saw a way of transferring our existing infrastructure, integration and expertise to get up and running pretty quickly, without needing to recreate any core competencies.” A plan takes shape The plan, says Pickering, is to place vessels where there is a secure base load so that ships and terminals can be financially underwritten. Once that’s in place, peripheral opportunities can be explored and developed to support incremental growth. Avenir is constructing an LNG terminal and distribution facility in the Italian port of Oristano, Sardinia, which is due to come online in mid-2020. The company is close to a final investment decision for a project to ship LNG from the south of England up to Scotland, which is expected to come online in autumn 2021. The latter, says Pickering, is a classic example of stranded demand: “Gas was coming into Kent and then being trucked up the length of the country to customers in Scotland. How can that be efficient?” Avenir is also on the shortlist for a government-backed project in Quebec, Canada. Stranded demand is only half the picture, the flipside of which could be described as stranded supply. Most large terminals are not set up to cater for smaller LNG carriers, says Pickering. Instead, an answer was found in underutilized FSRU vessels. Initially Stolt-Nielsen leveraged its strong relationship with Golar LNG, which, as it turned out, had FSRUs with spare capacity situated close to areas of stranded demand. Later, it approached Hoegh LNG, another large FSRU operator, which had eyed the small-scale distribution market as ripe for development but was yet to step in. “Everything was coming together. Having both Golar and Hoegh on board would provide global coverage, which we could sew together into a seamless offering.” The conversation culminated in October 2018, when the three companies announced a combined investment commitment of $182 million in Avenir. Stolt-Nielsen will consolidate all its LNG activities into Avenir, including an additional two 7,500m3 gas carriers plus two already on order at Keppel Singmarine in Nantong, China, two 20,000m3 gas carriers also being built in Nantong by Sinopacific Offshore & Engineering and the joint-venture LNG terminal and distribution facility in Sardinia. LNG carrier design inverted In the design of its ships, Avenir turned conventional wisdom on its head. Pickering elaborates: “We took the opposite approach to our competitors. We consider them first and foremost as transport vessels – not bunkering ships – and that’s what drove the design. The optimization of the hull form, the dual-fuel engine and propulsion arrangement, the fuel system and auxiliaries were all optimized with the transport function in mind.” During their design, particular attention was paid to the gas containment and fuel system, as the goal was to match boil-off gas with consumption and to get both low. In addition to sophisticated boil-off gas management, bunkering functionality is bestowed through increased pumping capabilities, ship-to-ship transfer equipment and enhanced manoeuvrability for approaching receiving ships and accessing smaller customer sites. The collaboration with DNV GL was a key enabler in the design of the vessels. Pickering elaborates: “They immediately grasped the broader picture of what Avenir wants to achieve – rather than approach the project as a simplistic compliance exercise. With an ambition to create a sustainable small-scale LNG supply chain that will one day operate globally, understanding both the operational and business implications of that vision must go hand-in-hand with technical ingenuity as we encounter challenges during that journey. The ships themselves are individual components in a bigger machine.” While Avenir’s business model is currently centered around serving power and industrial customers, it anticipates growth in marine bunkering. “The appetite for LNG as a fuel for ships is picking up. We envisage the market in a few years will look very different from today, with more local import and storage facilities making LNG increasingly accessible and therefore appealing to shipping.” Low-sulphur trigger The forthcoming IMO 2020 regulations on fuel sulphur are one of many driving factors for increased small-scale LNG consumption. “With less than a year to go, there’s still considerable uncertainty. Some owners are investing in scrubbers while others are waiting to see how the supply situation for low-sulphur products develops,” observes Pickering.
Re-election of NDA will be credit neutral for oil and gas sector: ICRA
The re-election of National Democratic Alliance (NDA) will be credit neutral for the domestic oil and gas sector, research and retaings agency ICRA said today. It added that even though the government’s initiatives should help companies in the sector going forward, clarity on pricing freedom on sensitive products and adequate subsidy provision will be critical for the financial profile of the Public Sector Undertakings (PSUs). “The re-election of NDA will be credit neutral for the domestic oil & gas sector. Even while the credit profiles of the oil & gas companies are getting strained due to debt funded consolidations among the PSUs, large dividend payouts and shares buyback, and intervention in the pricing of auto fuels when crude prices were ruling high,” said K Ravichandran, Senior Vice President at ICRA. Oil and Natural Gas Corporation (ONGC), India’s largest oil and gas producer, had last fiscal acquired Hindustan Petroleum (HPCL), the government-owned fuel retailer at a cost of Rs 36,915 crore. While, the acquisition helped the government meet its disinvestment target for the fiscal, it impacted the oil explorer’s working capital and cash reserves during the fiscal. Also, Oil Marketing Companies (OMCs) had to face the ire of the consumers when they had last year initiated a 19-day price freeze on petrol and diesel before the Karnataka elections. Petrol and Diesel prices at retail pumps operated by IOC, HPCL and Bharat Petroleum (BPCL) remained unchanged for 19 straight-days from 24 April, 2018 even as the benchmark international fuel prices had increased on the back of surge in crude oil prices. “There have been several policy initiatives such as for reinvigorating the exploration & production sector, deeper penetration of natural gas through aggressive roll out of CGD infrastructure in new cities and new LPG connections, which should help the companies in the sector going forward,” Ravichandran said. The government had during its previous tenure revamped oil and gas bidding framework and the oil and gas exploration policy. The new bidding frame-work allowed companies to carve out their own blocks and allowed all forms of hydrocarbon extraction under a single license. Also, the HELP frame-work replaced the then prevalent fiscal system of production sharing based on Investment Multiple and cost recovery or production-linked payment with a revenue sharing model. Petroleum and Natural Gas Regulatory Board (PNGRB) has awarded licenses for setting up city gas distribution networks in 136 geographical areas in the past year which is expected to expand the network of Compressed Natural Gas (CNG) stations in the country to 10,000 from the current 1,500 and piped natural gas (PNG) connections to household kitchens to five crore from around five lakh currently. PNGRB Chairman D K Sarraf had in March said around Rs 70,000 crore investment was committed in 86 GAs awarded in the 9th city gas bid round in August last year while additional Rs 50,000 crore was committed in the 50 GAs awarded in the 10th round this year. The government has also released 7.19 crore LPG connections under Pradhan Mantri Ujjwala Yojana (PMUY) so far. Commenting on the results of the just concluded general elections, Pramod Chaudhari, chairman at Praj Industries said. “I expect the new government to take up economic stimulus and growth as a priority agenda. As a result of the prevailing geopolitical situation, there is a sense of skepticism, especially owing to the rise in crude oil prices and flagging trade wars. New Government should de-bottleneck and accelerate the implementation of progressive Bio-fuels policy.” Chaudhari also said the government should oversee fulfillment of ethanol blending mandate of 10% and eco-system development to set up Compressed Bio Gas (CBG) plants. In a bid to reduce reliance on conventional fuels, increase farmers’ income and propel the use of biofuels in the country, the oil ministry had last year launched a new scheme and announced the new biofuel policy. The scheme aims at rolling out 5,000 Compressed Bio-Gas plants in a phased manner, with 250 plants by the year 2020, 1,000 plants by 2022 and 5,000 plants by 2025, at an investment of around Rs 1.7 lakh crore.
Natural gas supply turns successful in South India
Hyderabad based MEIL’s Hydrocarbon division made an extraordinary beginning in the field. It has completed and commissioned many projects in the last financial year. Oil storage tanks, Gas based power generation units, Gas processing units, Pipeline projects and city gas distribution projects were taken up and completed most of them. MEIL’s Hydrocarbon division also has had a presence in the global market by execution projects in Kuwait and Jordan. It also expands to Singapore, Bangladesh. Global footprints It has commissioned Gas Turbine in Power generation and energy solutions at Arab Potash Company (APC), Jordan. This 54-megawatt gas-based power plant commissioned in the month of October 2018 and running successfully. This project includes Engineering, supply, erection and commissioning of the Gas turbine of 54 MW capacity, Heat recovery steam generator, step-up transformer of 80 MVA. Another global project by MEIL’s Hydrocarbons division is at Al-Zour project for KIPIC, Kuwait. This order is aimed at the construction of 66 storage tanks of capacity ranging from 60M dia to 78M dia which involves the structural quantity of 70,000 MT. “MEIL mobilised 3000 manpower to Kuwait for this project. Most of the construction of the tank completed and Hydro test is in process. The project expected to be completed by December 2019. MEIL received Appreciation Certificate from KIPIC for achieving 10 Million safe man-hours work.” Said P.Rajesh Reddy, Vice-President, Hydrocarbons division of MEIL. RGT in record time Gas processing plant with 90 MMSCMD capacity at Rageswari, Rajasthan constructed and commissioned within a span of just 7 months. This project is awarded by Cairn in the month of August 2018. MEIL mobilized its resources in the same month and started execution works immediately because of the fast-track nature of the project. The team took up the challenge on war-footing and began working 24 hours a day on the civil, mechanical, electrical, and instrumentation aspects of the project. The project commissioning works started in March 2019. Explaining reasons to this achievement Mr P.Rajesh Reddy, Vice-President said that “After deploying close to 0.15 million man days, MEIL successfully completed the project with world-class quality standards and zero incidents. The project is the first of its kind to be built in a record period of six months. Due to this unparalleled achievement, MEIL proved its mettle once again and has risen to the position of a leading player in the international hydrocarbons industry.” Pipeline replacement projects ONGC awarded pipeline replacement project to MEIL. Six pipeline replacements Geleki, Assam and five pipeline replacement project in South Santal to Becharji. The first project involves 5 oil segments about 128.3 km and One Gas pipeline of 16.5km. These pipeline replacements are aimed at increasing operational efficiency of ONGC. MEIL laid 3 segments 48.3km of pipeline in 2017 and the balance pipeline segments of 91.62km in 2018 which are in use by ONGC. Assam Renewal Project ONGC awarded the Assam renewal project involves revamping and optimizing 21 existing ageing infrastructure to 9 new integrated complex’s, to mitigate maintenance, operational problems and environmentally friendly infrastructure fully compliant to statutory requirements for the production of balance recoverable reserve of Oil and Gas in North East region for at least next 25 years. As a part revamping of Assam Lakhmani Field, MEIL commissioned Effluent Treatment Plant (ETP), Water Injection Plant (WIP) and Group Gathering Station V (GGS V) installed in 2018. Upgradation of firefighting ONGC’s Mehsana Asset’s four installations firefighting system up-gradation project also bagged by MEIL. According to MB Lal committee recommendation, to ensure an effective fire protection system at 4 installations in Mehasana, Gujarat. Out of 4 installations, MEIL completed 2 installations and balance 2 installation is in an advanced stage of commissioning and will complete by July 2019 City Gas Distribution (CGD) MEIL visualized and has undertaken the project of natural gas supply for Domestic, Commercial, Industrial and transport sector in South India. MEIL got approval from Petroleum and Natural Gas Regulatory Board (PNGRB) to distribute natural gas in 16 districts – among them, 14 districts are in AP & Telangana, and 2 districts are in Karnataka. Presently, MEIL has created a network for the distribution of natural gas to consumers under the brand name ‘Megha Gas’ for domestic, commercial, industrial, & automobile sectors in Krishna, Tumkur, Belgaum districts. Soon, MEIL is creating a network in 13 Telangana districts. Until now, MEIL has laid a pipeline of length 360 km. In the future, MEIL is planning to lay pipelines of about 900 Km in AP, Telangana, & Karnataka. The nature of business is mainly divided into Piped Natural Gas (PNG) and Compressed Natural Gas (CNG). PNG, the gas which is directly supplied to domestic, commercial and industrial consumers through the pipeline. CNG is used by the transportation sector. On shore Gas Fields. With a view to developing Gas Grid Networks in AP & Telangana, MEIL has strategically secured Onshore Gas fields from ONGC in the regions of Nagayalanka and West Penugonda. Gas evacuation from these fields will account to around 130000 SCM per day. For this purpose, MEIL had installed mechanical refrigeration units procured from the USA, compressors, & other mechanical packages. MEIL has already commissioned the Nagayalanka Field and currently supplying Natural Gas to PNG customers in and around Krishna District. MEIL also intend to supply the natural gas through cascades to industrial establishments in Telangana as well. MEIL is geared to start operations in other regions once approvals received from ONGC for the West Penugonda field.
Malaysia’s Petronas shuts Sabah-Sarawak gas pipeline for maintenance
Malaysia’s state oil and gas company Petroliam Nasional Bhd said on Tuesday it has shut the Sabah-Sarawak gas pipeline that feeds gas to its liquefied natural gas (LNG) complex at Bintulu in the state of Sarawak as part of maintenance work. Operations will resume when the maintenance work is completed, said Petronas, as the company is popularly known, in a statement, without specifying how long works would take. “LNG supply from Petronas LNG Complex is not impacted as any shortfall of gas supply from the Sabah-Sarawak gas pipeline shall be made up with the gas supply from other fields in offshore Sarawak during this period,” the company said. Reuters reported last week that Petronas had temporarily shut down the pipeline for repairs that will take about two months, slowing down production at its Bintulu complex and potentially curbing spot LNG exports from Malaysia. Petronas is the sole manager of Malaysia’s oil and gas reserves and is the world’s third-biggest LNG exporter after Qatar and Australia.
Reliance topples Indian Oil to become the biggest Indian company
Richest Indian Mukesh Ambani’s oil-to-telecom conglomerate Reliance Industries has toppled state-owned Indian Oil Corp (IOC) to become the country’s biggest company by revenue. Reliance in the 2018-19 fiscal year that ended March 31, reported a turnover of Rs 6.23 lakh crore. In comparison, IOC posted a turnover of Rs 6.17 lakh crore for the fiscal, according to regulatory filings by the two companies. It was also the most profitable company in the country with a net profit of more than double that of IOC in FY2019. Reliance, which was about half the size of IOC till about a decade back but its bet on burgeoning consumer base and foray into new businesses such as telecom, retail, and digital services vastly expanded its business, clocked a net profit of Rs 39,588 crore in FY19. IOC, on the other hand, ended the year with a net profit of Rs 17.274 crore. IOC till last year was the most profitable PSU but may have lost this position to Oil and Natural Gas Corp (ONGC) in 2018-19. ONGC is yet to declare its FY19 earnings but it had clocked a net profit of Rs 22,671 crore in the first nine months of the fiscal year. Net profit of IOC, which depends on oil refining, petrochemicals and gas business for its revenue, had in 2018-19 declined by 23.6 per cent over Rs 22,189.45 crore net profit it had earned in 2017-18. Reliance, on the other hand, posted a 13 per cent rise in profits over Rs 34,988 crore recorded in 2017-18. ONGC had a net profit of Rs 19,945.26 crore in 2017-18 fiscal, lagging behind IOC. With this milestone, Reliance has achieved the numero uno position in terms of all three parameters – revenue, profit, and market capitalisation. With strong refining margin and robust retail business, Reliance clocked a 44 per cent in revenue in FY19 over the previous year and posted a compounded annual growth rate of over 14 per cent between FY10 and FY19. In contrast, IOC turnover rose 20 per cent in FY19 and 6.3 per cent during FY10 and FY19. At Tuesday’s trading price of Rs 1,345, Reliance boasts of a market capitalisation of Rs 8.52 lakh crore. Interestingly, Reliance which boasts of the highest cash reserves of Rs 1.33 lakh crore on the book, also has the highest gross debt of Rs 2.87 lakh crore at the end of March 2019. In contrast, IOC had short and long-term loans totaling Rs 92,700 crore.
HPCL likely to borrow Rs 8,000 cr in FY20 to revamp its refineries: Chairman MK Surana
Hindustan Petroleum Corporation Ltd, India’s third-largest oil refiner may borrow about Rs 7,000-8,000 crore in FY20 for revamping its refineries at Mumbai and Vishakhapatnam, company’s Chairman MK Surana said in its Q4 FY19 earnings press conference. In FY19, HPCL borrowed Rs 6,000 crore, Rs 3,000 short-term and long-term each. A large part of the company’s borrowings go into funding its capex. HPCL’s capex for FY20 is pegged at Rs 14,000 crore, as against Rs 11,000 crore last fiscal. HPCL will be investing a total of Rs 5000 crore for its Mumbai refinery and Rs 21,000 crore for the Vizag’s. The investments will happen over a period of time, and also include aligning refineries with the new BS VI regulation norms, with effect from April 1, 2020. “It may happen for various instruments. We have got a combination of instruments which we use via foreign currency borrowings and foreign currency bonds, and may do in multiple tranches,” said Surana. Surana also shared that as of March 31, 2019, HPCL’s total debt was at Rs 27,244 crore as against Rs 20,991 crore at the end of the previous financial year. The increase in debt was mainly due to higher investments in projects and is not a sign of worry for the company, confirmed Surana. He went on to adding, “Our debt-to-equity ratio is quite comfortable, it is not a concern.” The company’s leverage stood at 0.97 as of March 31, 2019 as against 0.88 at the end of the previous financial year. Surana expects international oil prices to remain around $70-75 per barrel for the next six months provided things remain constant. He predicts oil demand in India to grow by 4-4.5 percent, diesel by 2.5-3 percent, and petrol by 7-8 percent in the financial year 2019-20. HPCL Chairman also said that he would like to see the new government consider bringing petroleum products under the ambit of Goods and Services Tax regulation. This way it would help the industry to reap benefits of input tax credit. “It (bringing the petroleum products under the GST) will also help in more investments if the new government considers in the GST policy reform…,” he said, adding, “HPCL lost about Rs 400 crore in FY19 for petroleum products not been included under the GST regime.”
TAPI gas pipeline meeting to be held in Turkmenistan today
A delegation led by Special Assistant to Prime Minister Imran on Petroleum Nadeem Babar departed for Ashgabat, Turkmenistan on Sunday to participate in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline meeting. Groundbreaking of the TAPI gas pipeline will be held in Pakistan in October, according to sources. The Pakistani delegation is traveling to Turkmenistan to finalize the plans for the groundbreaking of the project. The TAPI gas pipeline project is expected to be completed by 2022 in Pakistan. Once completed; Pakistan is expected to receive 1.320 billion cubic meters (bcm) of natural gas. The TAPI project, supported by the United States and the Asian Development Bank (ADB), has been touted by Turkmenistan since the 1990s. But the start of work was delayed because of the problem of crossing Afghanistan. The ADB is acting as the facilitator and coordinator for the project. It is proposed to lay a 56-inch diameter 1,680 KM pipeline with design capacity of 3.2 billion cubic feet of natural gas per annum (Bcfd) from Turkmenistan through Afghanistan and Pakistan up to Pak-India border. The pipeline will run for hundreds of kilometers (miles) through areas of southern Afghanistan largely controlled by Taliban fighting the Western-backed government in Kabul but the movement has signaled that it will not hinder the project. Ex-Soviet Turkmenistan holds the world’s fourth-largest natural gas reserves but has been heavily dependent on gas exports to China after Russia cut back gas imports in the past few years. The project is expected to transport 33 billion cubic meters (bcm) of natural gas a year along a 1,800-kilometer route from Galkynysh, the world’s second-biggest gas field, to Fazilka near the border with Pakistan in northern India. Afghanistan, which suffers from chronic energy shortages, is expected to take five billion cubic meters of the gas itself, with the rest divided equally between Pakistan and India. In addition, Kabul will earn hundreds of millions of dollars in transit fees.
PNGRB officials to discuss Morbi issues
A team of officials from the Petroleum and Natural Gas Regulatory Board (PNGRB) is set to visit Gujarat this month to review various issues regarding supply of natural gas at the ceramics hub of Morbi — the country’s biggest gas consuming centre at a single location. While the demand for gas has gone up almost three-fold in the last two months following the National Green Tribunal order regarding closure of coal-based gasifiers, companies like GAIL (India) and a few others have been looking to break into the biggest customer base of Gujarat Gas. The meeting is crucial for Gujarat Gas as it sells nearly half of its total natural gas in Morbi. However the company’s exclusive marketing rights ended in September last year. The PNGRB team will visit the state on May 27 and hold a joint meeting with Gujarat Gas officials and members of Morbi Ceramics Association — the umbrella organization for all ceramics associations in Morbi, said an official of PNGRB. The official said that though Gujarat Gas’ marketing exclusivity for Morbi has ended, the oil and gas regulator is yet to pass any order regarding this. A decision on this is also likely to be made during the visit, he added. The meeting will focus on problems like shortage in gas supply and complaints regarding gas pressure. Large number of ceramic tile makers have switched over to gas following NGT’s order for closure of ceramic units running on coal-gasifiers. The move has created a spurt in the demand for natural gas. Gujarat Gas earlier supplied about 2.5 million metric standard cubic meter per day (mmscmd). However after the NGT order, the supply from the Gujarat government company has gone up to 4.5 mmscmd. Further demand of 2-2.5 mmscmd is expected in the near future, said an official of Morbi Ceramics Association. “Gujarat Gas cannot afford to lose its dominance in Morbi. While it has network exclusivity for a period of 25 years, the company’s margins would be adversely affected if some other company gains foothold in Morbi,” said an industry expert privy to the development. He said that once PNGRB passes an order regarding Gujarat Gas’ marketing exclusivity, the Morbi network will be open to other companies after fixing network tariff.
Greenpeace activists block entrance to BP HQ demanding an end of oil exploration
Greenpeace activists blocked the entrance to BP headquarters in London on Monday, demanding one of the world’s biggest energy companies ends all new oil and gas exploration or goes out of business. Greenpeace activists arrived at BP in St James’ Square at 0200 GMT and encased themselves in specially designed containers to block all the building’s main entrances. A team of activists abseiled from the top of the building and placed huge letters in the windows reading ‘CLIMATE EMERGENCY’. “BP is fuelling a climate emergency that threatens millions of lives and the future of the living world,” said Paul Morozzo, a Greenpeace activist. “The science is clear – we must stop searching for new oil and gas if we want a liveable planet. BP must clean up or clear out,” Morozzo said. BP is due to hold its annual general meeting (AGM) of shareholders on Tuesday in Aberdeen, Scotland. Greenpeace said it would keep the London HQ closed for at least a week. “At their AGM tomorrow BP’s Bob Dudley has a choice – he can immediately end oil exploration and start switching to 100% renewables or wind down the company,” Morozzo said. No one from BP responded to requests for comment. BP employs 73,000 people and produces 3.7 million barrels of oil equivalent per day. BP says renewable energy sources could provide at least 15% of the world’s energy by 2040.
Russia’s Gazprom in talks on five-year Turkmen gas contract
Russian natural gas producer Gazprom is in talks to sign a five-year contract to buy gas in Turkmenistan, Interfax news agency cited Russian Deputy Energy Minister Anatoly Yanovsky as saying on Thursday. The talks are expected to be completed in May-June, RIA news agency cited Yanovsky as saying. He did not say what volume of gas was being discussed.