Green nod to HPCL Shapoorji’s LNG terminal
Setting the stage for building the fourth liquified natural gas (LNG) terminal in Gujarat, the ministry of environment, forest and climate change (MoEF) has accorded environmental and CRZ (coastal regulatory zone) clearance to HPCL Shapoorji Energy Private Ltd (HSEPL) for developing new LNG storage and re-gasification terminal at Chhara in Kodinar of Gir Somnath district. HSEPL, a joint venture between Hindustan Petroleum Corporation Ltd (HPCL) and Shapoorji Pallonji group’s SP Ports Pvt Ltd (SPPPL), plans to set up 5 million tonnes per annum LNG terminal within the proposed area of Chhara port. The project cost is estimated to be Rs 5,408.82 crore. ALSO READ: ONGC gets single bid from Schlumberger for oil field production upgrade “As per recommendations of the EAC (expert appraisal committee), the ministry hereby accords environmental clearance to the project ‘development of LNG storage and re-gasification terminal’ at village Chhara taluka Kodinar, district Gir Somnath, Gujarat by HPCL Shapoorji Energy Ltd,” the ministry said in its recent notification. HSEPL’s LNG terminal will have LNG ship unloading jetty, LNG storage, LNG transfer and vaporization as well as other utilities and infrastructure facilities. “The terminal will be provided with latest state of art instruments and controls for safe handling of LNG and LNG terminal operation,” the company said in its environment impact assessment (EIA) study. Petronet LNG already operates 15 MTPA terminal at Dahej and Shell Gas runs 5 MTPA terminal at Hazira. The third LNG terminal by GSPL LNG Ltd at Mundra in Kutch was inaugurated by the prime minister Narendra Modi in October last year. According to a recent research report by the rating agency Crisil, natural gas demand in India is expected to grow at compound annual growth rate of 3.5 per cent between fiscals 2018 and 2023. The demand is estimated to be 191-193 million metric standard cubic meter per day (mmscmd) across the country. “Given the sustained domestic gas deficit, LNG demand is expected to increase at CAGR of 4-4.3 per cent to 24.4- 24.7 million tonnes per annum (MTPA) between fiscals 2018 and 2023. Over the period, installed re-gasification capacity is forecast to increase to 50 MTPA from 26.7 MTPA (considering operational terminals only),” the report added.
Unavailability of cheap natural gas may pinch distributors: Regulatory Board Chief
A squeeze in supply of cheap local natural gas in the future can erode the margins of city gas distributors but the business would remain viable due to the present price advantage gas has over petrol and diesel at present, state’s support for the cleaner fossil fuel and creation of an efficient gas ecosystem over time in the country, said the chief of downstream regulator. The Petroleum and Natural Gas Regulatory Board (PNGRB), the downstream regulator, has worked overtime in a year to give away city gas distribution licences for 136 geographical areas, aimed at raising piped gas coverage to 70% of the country’s population from 20% now. Distributors face the risk of inadequate supply of cheap local gas — its production has stagnated for years and has claimants from several sectors. A tweak in domestic pricing formula or tax structure can make gas expensive. “If cheap gas is not available, it will hurt implementation of projects. That goes without saying. But what are the chances of this fear fructifying?” PNGRB chairman DK Sarraf told ET in an interview. Irrespective of the political party in power, the state support for the environment-friendly natural gas is unlikely to waver, Sarraf said. “Natural gas is still a holy cow,” he said, adding that natural gas would always have an advantage over petrol and diesel even after they are brought under the goods and services tax (GST). For a driver, compressed natural gas (CNG) turns out to be about 60% cheaper than petrol, and 40% cheaper than diesel, giving city gas distributors ample scope to accommodate future increases in natural gas price and yet stay profitable, Sarraf said. With services planned for so many licences areas, an efficient city gas ecosystem would evolve across the country and drive costs down for players, he said. Distributors’ demand for cheap local gas will rise roughly eightfold to about 95 million metric standard cubic meters a day (mmscmd) in about eight years, Sarraf said. This is a ballpark calculation factoring in the work programme committed by new licensees as well as the expected expansion by already operating players. India currently produces about 90 mmscmd of natural gas, of which only about 70 mmscmd is available for sale after flaring, loss and internal use by producers. Much of the incremental gas expected to be produced in the coming years will be outside of the government-set price formula, which keeps prices low. Local gas offered at market rates is likely to be priced closer to import rates, which is currently about double that of formula price.
Saudi’s Falih: OPEC may cancel April meet, but hold steady on oil output
OPEC and its non-OPEC partners need to reconsider if there is a need for a meeting in April, Saudi Arabia’s energy minister said on Monday, adding that there was no pressure from the United States to increase supply. “We are not under pressure except by the market,” Khalid al-Falih told reporters ahead of a meeting of the Joint Ministerial Monitoring Committee (JMMC) in Baku, the capital of Azerbaijan. “As long as the levels of inventories are rising and we are far from normal levels, we will stay the course guiding the market towards balance.” The JMMC includes major oil producers Saudi Arabia and Russia and monitors the oil market and conformity levels with supply cuts. “There is a consensus that has also emerged that no matter what, we should stay the course until the end of June.” Asked whether he was updated on whether the United States administration would extend the waivers it granted to buyers of Iranian crude, which are due to end in May, Falih said: “Until we see it hurting consumers, until we see the impact on inventory, we are not going to change course.” The oil producers are due to meet next in April in Vienna, but Falih said this may not happen. “The consensus we heard … is that April will be premature to make any production decision for the second half,” Falih said. “We may not have a meeting in April,” he said, adding that the JMMC may recommend this later on Monday.
Russia’s Novak says sanctions volatility is a pain for energy markets
Russian Energy Minister Alexander Novak said on Sunday that U.S. sanctions on Venezuela and Iran were having a negative effect on global energy markets, hindering long-term planning and confusing investment decisions. Novak said planning even a few months ahead is tough due to possible sanctions-related volatility, adding that the country imposing sanctions — an apparent reference to the United States — was doing so in order to promote its own goods.
Schlumberger seeks deviations in ONGC oilfield tender for raising output
New York-listed contractor Schlumberger – the sole bidder in state-owned ONGC’s tender for raising oil production from aging fields – has sought several deviations from the bidding norms, including projection of a 26-27 per cent decline in output in next few years. India’s leading national oil company launched its initial tender for Production Enhancement Contracts (PEC) in April 2018 for raising output beyond the business as usual (BAU) scenario from two aging fields. Schlumberger submitted the only application for Geleki, while ONGC received no bids for Kalol oilfield in Gujarat. Sources privy to the development said Schlumberger is projecting a 26-27 per cent decline in base production in next few years and has sought several deviations in tender norms for infusing technology to raise output over this base. The government has been pushing ONGC to hire international oil service companies to raise output from its mature oilfields as it saw the foreign companies as the answer to declining production from ageing fields. Last year, ONGC had shortlisted Schlumberger, Halliburton and GE subsidiary Baker Hughes for raising output from Kalol field in Gujarat and Geleki field in Assam. At the close of bids, only Schlumberger made a financial bid for Geleki field, the sources said. No bid was received for Kalol field. The service providers will be paid a fee for raising output beyond an agreed baseline production. The state-owned form is discussing with Schlumberger the deviations sought by it, according to the sources. ONGC top brass, they said, are keen to conclude a contract with Schlumberger soon to get the project going. Based on experience of the Geleki bidding, the company plans to bring out similar bidding for few other ageing oilfields. ONGC is looking to raise domestic output quickly to meet Prime Minister Narendra Modi’s target of cutting import dependence by 10 per cent by 2022. India currently imports over 83 per cent of its oil needs. Originally, ONGC had on December 7, 2016, signed a Summary of Understanding (SoU) to give Kalol field to Halliburton and Geleki field to Schlumberger for raising production above the current baseline output. Though the contracts were signed in presence of Oil Minister Dharmendra Pradhan, ONGC rescinded them in 2017 on fears of courting controversy for handing fields on nomination basis. Thereafter, the company in June 2017 floated an expression of interest (EoI) from service providers for undertaking production enhancement. Schlumberger Asia Services, Halliburton Offshore Services Inc and Baker Hughes Singapore PTE Ltd were shortlisted as the firms were meeting pre-qualification criteria. Bids were originally sought by May 25, 2018, but saw several extensions and final bids came in a couple of months back. The 15-year Production Enhancement Contract (PEC) will require the oilfield service producer to commit to investing in capital expenditure and operating expenditure to increase production from the existing baseline output. A tariff will be paid in USD per barrel of oil and USD per million British thermal units for gas for any incremental hydrocarbon produced and saved over the baseline. The baseline was to be prepared by ONGC and vetted and certified by a third party of international repute but Schlumberger is seeking deviations in it, the sources noted. All the oil and gas produced will belong to ONGC and the service provider arrangement is being entered into to get the best technology available, they added. Besides Schlumberger, Halliburton and Baker Hughes, ONGC was also in talks with Weatherford International. The sources said based on the experience of Kalol and Geleki, the PEC model may be extended to other onshore fields.
Novatek close to deal with Saudi Aramco on Arctic LNG 2 project – CEO
Leonid Mikhelson, chief executive of Russian gas giant Novatek, said on Sunday he had discussed the company’s Arctic LNG 2 project with Saudi oil minister Khalid al-Falih and that a deal could be expected soon. “We are in talks with Saudi Aramco (on the Arctic LNG 2 project). I think we will get something concrete in coming months,” Mikhelson said, adding that he did not expect global liquefied natural gas (LNG) prices to change after the project’s launch. Speaking on the sidelines of a meeting of OPEC members and other major oil exporters in Baku, Mikhelson also said that the so-called ‘gas OPEC’ – a loose organisation of global leading producers of natural gas – would strengthen on the global energy markets.
IOC hopes to restart fire-hit unit at Panipat plant in 2-3 days
Indian Oil Corp hopes to restart a 150,000-barrel-per-day (bpd) crude distillation unit (CDU) at its Panipat refinery in the next 2-3 days, its head of refineries said on Monday, days after the unit caught fire due to a naphtha leak. IOC, the country’s top refiner, had shut the CDU and some other secondary units at the 300,000-bpd refinery in the northern state of Haryana for about a month from mid-February for routine maintenance. “After the maintenance and inspection, the unit (crude distillation unit) was under start-up. There was a naphtha leak from a cooler upstream,” B.V. Rama Gopal, IOC’S head of refineries, told Reuters. The state-controlled company has two equal size CDUs at the refinery. IOC said one worker died due to the fire on Saturday.
Oil demand concerns overdone, Brent to rally above $70 per bbl: Goldman
Higher oil demand coupled with declining production and supply cuts could help Brent prices rally above $70 per barrel in the near term, Goldman Sachs said. Demand is off to a strong start in 2019, with recent oil data suggesting current demand concerns should ease further, Goldman said in a note on Thursday. Based on available demand data that shows an increase in consumption in January of 1.55 million barrels per day (bpd) from a year earlier, the US bank estimates that overall global demand increased by nearly 2 million bpd during the month. This growth was visible in both emerging and developed markets. Meanwhile, supply losses in 2019 are large with producers in the Organization of the Petroleum Exporting Countries (OPEC) exceeding their cut commitment and on accelerating declines in Venezuelan output, Goldman said. “The political stalemate in Venezuela increasingly creates risks that the decline in output due to the U.S. oil sanctions more than offsets the rebound in Libya, which would bring global output below our expectations and further tighten heavy crude supplies,” it added. Oil prices were stable on Friday, propped up by production cuts led by OPEC and as U.S. sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter of 2019. Crude oil prices are on course for the best quarter since mid-2016, with a 25 percent gain so far. “Physical markets have driven the rally in prices this year while net speculative length has remained at depressed levels given high fundamental uncertainty and last year’s volatile fourth quarter,” Goldman said. The investment bank expects the current fundamentals to tighten physical markets further, in turn driving the Brent forward curve into further backwardation. Backwardation is a market structure where prompt prices are higher than later prices and suggests that demand for a commodity is high or that prompt supply has declined.
IEA sees oil market flipping into deficit in second quarter
The oil market will flip into a modest deficit from the second quarter of this year, with OPEC possessing a hefty supply cushion to prevent any price rally in case of possible supply disruptions, the International Energy Agency said on Friday. The IEA, which coordinates the energy policies of industrialised nations, kept its forecast of growth in global oil demand this year unchanged at 1.4 percent, or 1.4 million barrels per day (bpd). Solid growth in non-OPEC oil output led by the United States should ensure demand is met, the IEA said. The Paris-based IEA said the market could show a modest surplus in the first quarter of 2019 before flipping into a deficit in the second quarter by about 0.5 million bpd. “At the same time, (OPEC) production cuts have increased the spare capacity cushion. This is especially important now as economic sentiment is becoming more pessimistic and the global economy could be entering a vulnerable period,” the IEA added. The agency said it was particularly concerned about a possible further decline in production in Venezuela, where output has stabilised at 1.2 million bpd in recent months. It said the degradation of the Venezuelan power system, vital for oil output, was such that it could not be sure whether fixes were durable. However, in the event of a major loss of Venezuelan supply, the Organization of the Petroleum Exporting Countries had about 2.8 million bpd of effective spare capacity, the IEA said. The agency also said rising U.S. output was providing comfort to world markets. In 2018, the United States contributed 79 percent of the 2.8 million bpd of non-OPEC output growth. “The relentless pace continues into 2019, when U.S. supply is expected to expand by 1.5 million bpd and account for 83 percent of non-OPEC growth of 1.8 million bpd,” it said. “What is game changing is that the U.S. in 2021 will become a net oil exporter on an annual average basis.” With production in Canada also increasing, and most of its exports moving to U.S. refineries, more U.S. crude should be available for export. In 2019, U.S. seaborne oil trade will move into surplus with net exports rising to nearly 4 million bpd by 2024.
Existing and proposed LNG terminals in India
India had four terminals receiving liquefied natural gas last year, with total capacity of 30 million tonnes a year, although taking in 21 million to 23 million tonnes, up 10 to 13 percent from 2017, according to data from the Petroleum Planning and Analysis Cell and shipping data. Over the next seven years the government plans to build another 11 terminals. One of those received its commissioning cargo this month, and at least two more are to start up or expand later this year. Apart from Indian Oil Corp’s Ennore terminal in Tamil Nadu in southern India, state power utility Gujarat State Petroleum Corp (GSPC) and Adani Group are adding a joint venture terminal at Mundra in western India expected this year or next, and H-Energy is starting up its Jaigarh terminal, also in the west, this year. Philippines-based Atlantic, Gulf & Pacific Company (AG&P) is also adding new capacity next year, and expansions are expected at Petronet LNG’s Dahej terminal and Royal Dutch Shell’s Hazira terminal. The additions and expansions will bring India’s LNG import capacity to 41.5 million tonnes this year, with import demand expected at 25 million to 26 million tonnes.