Petronet expects to boost LNG imports up to 15 per cent in FY19
India’s leading gas importer Petronet LNG expects its liquefied natural gas (LNG) imports to rise by up to 15 percent this fiscal year from a year ago once an expansion at its largest terminal is completed, the company’s top official said on Thursday. Natural gas is projected to double as a share of India’s energy mix by 2030 as oil-fired power plants convert to natgas, while pipelines are being built to expand the fuel’s use in the residential and transportation sectors. The pace of growth largely depends on how quickly gas infrastructure is completed, Indian energy officials have said. Petronet’s LNG imports are expected to rise to around 22 million to 23 million tonnes per year (tpy) in the fiscal year ending March 2020, up from just under 20 million tpy last year, the company’s Chief Executive Officer Prabhat Singh told Reuters on the sidelines of the CERAWeek conference in Houston. In February, Petronet LNG inked an initial deal with Tellurian Inc to invest in its proposed Driftwood project in Louisiana in the United States. “There is so much gas available in the U.S. and it is available at very cheap prices, we’re trying to see if we can acquire that,” Singh said. Gas demand in “India is going to see a fillip now. What we were lacking was an increase in customer base and infrastructure needs to come up,” Singh said, adding that national gas grid pipelines and city gas infrastructure are being built while intercity trucks and buses could switch to natural gas in the future. The capacity of Petronet’s Dahej terminal in western Gujarat state is being expanded to 17.5 million tpy from 15 million tpy. The company also operates a 5 million tpy terminal at Kochi in southern Kerala state.
City gas firms to witness profit boost of 250-300 bps on falling LNG prices
A 22-25 per cent decline in the prices of liquefied natural gas (LNG) since January this year, and an expected 5 per cent to 7 per cent rise in consumption of piped natural gas (PNG) and compressed natural gas (CNG) is set to drive up the profit margins of city gas distribution (CGD) firms by 250-300 basis points (bps) in the first half of 2019-20. That would reverse the trend of contraction seen in the first three quarters of financial year 2018-19. Spot LNG prices are likely to be in the $6.5 per mmBtu to $7 per mmBtu range in the first half of next the financial year, according to CRISIL Research. If the LNG price holds at $7 per mmBtu, it would mean a positive impact on LNG demand, especially from price-sensitive sectors. ALSO READ: Punj Lloyd wins arbitration award against ONGC Also, the National Green Tribunal’s recent decision to shut down coal gasifiers in Gujarat would drive LNG demand in the region. The ban on polluting fuels in northern states, too, would increase the appetite for LNG. “The margin improvement would be more pronounced for CGD entities with higher share of industrial consumers of PNG. In the past 3-4 months, these entities were forced to slash industrial PNG prices to match alternate fuel prices, which have headed south following a sharp fall in crude oil prices since November, 2018. However, with the decline in LNG prices, industrial PNG has become cost-competitive with fuel oil,” said Prasad Koparkar, senior director at CRISIL. At an average crude price of $64 per barrel, landed cost of fuel oil and liquefied petroleum gas (LPG) would be $12.1 per mmBtu and $16.9 per mmBtu, respectively. In comparison, industrial PNG would cost $11.7 per mmBtu and $12.3 at an LNG price of $7 per mmBtu and $7.5 per mmBtu, respectively. From the perspective of CNG and household PNG, strong demand is expected to continue because of clear cost advantage of these fuels over alternates such as petrol and LPG. In India, domestic-gas price is revised every six months and is linked to prices on four international hubs – Henry Bub in the US, Alberta in Canada, National Balancing Point in Europe, and Russian gas price. The next revision, for April-September, is expected to push up domestic-gas price by 7-9 per cent to $3.62-3.67 per mmBtu compared with $3.36 per mmBtu applicable till March 2019. This increase is expected to be fully passed on to end consumers, making CNG and household PNG dearer. CNG prices are expected to increase by Rs 1.5-2 per kg in Mumbai and Rs 1.7-2.2 per kg in Gujarat – amounting to a 3-4 per cent increase over current prices. In the household PNG segment, increase of 2-2.5 per cent is expected. However, despite this price increase, CNG would be around 35 per cent cheaper than petrol. And though household PNG could become expensive by Rs 1.5 per mmBtu to Rs 2 per mmBtu compared with subsidised LPG, it would remain competitive with non-subsidised LPG. Hence, demand volumes in the two segments are expected to sustain despite the price hike.
LNG demand journey to be shaky in India, slow due to infrastructure limits
India’s demand for liquefied natural gas (LNG) is set to rise by about 10 percent this year even as the country adds import capacity at a faster clip because infrastructure constraints keep gas from getting to consumers and hinder growth rates. New Delhi made a commitment in the Paris Agreement of 2015 to reduce the carbon emissions intensity of India’s economy by one-third and aims to more than double the shared gas has in its energy mix to 15 percent by 2030, from 6.2 percent now. India had four terminals receiving LNG last year, taking in 21 million to 23 million tonnes of the super-chilled fuel, up nearly 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 was commissioned this month, and two more are expected to start up later this year. “The strongest growth rate is expected in city gas demand, primarily due to an increase in consumption by commercial users on the back of growth in city-gas infrastructure,” said Poorna Rajendran, senior analyst for consultancy FGE. But with existing terminal capacity now at 35 million tonnes a year and additions and expansions expected to bring that to 41.5 million tonnes by end-2019, India’s LNG import terminals are likely to remain underutilized for years to come. Driven by demand from city gas distribution and transportation, India’s LNG demand is expected to grow by 9 to 11 percent to about 25 million to 26 million tonnes this year, said analysts from Wood Mackenzie and FGE. That would still put terminal utilization at just over 60 percent at year-end. While India’s ruling party plans to invest billions of dollars to extend the gas pipeline network across the country, progress is slow and half of the existing terminals operate at well below their capacity, several industry sources said. The government aims to run all LNG terminals at full capacity by 2022 as it works to complete the entire pipeline grid, India’s Oil Secretary M M Kutty told Reuters. Analysts, though, say India will struggle to do this. “The pace at which (planned projects) come on-stream will be dictated by the financial and technical capabilities of the promoters as well as wider infrastructure and land-related challenges in India,” said Wood Mackenzie’s senior analyst, Kaushik Chatterjee. For a graphic on India LNG imports, see – tmsnrt.rs/2F8dpSx CONSTRAINTS The Dabhol LNG terminal in Maharashtra state is underutilized, especially during monsoon season, although operator Konkan LNG, a subsidiary of utility GAIL (India), plans to invest in a breakwater to protect the harbor from big waves. Petronet LNG’s Kochi terminal in South India is not even connected to the main gas network because of resistance from landowners to pipelines, the sources also said. Kutty said a 400-km pipeline connecting Kochi to industries in Mangalore in the north “will be sorted out by March-April … worst case scenario it may be another month.” After that, capacity utilization at the terminal will rise to 40 percent, according to earlier estimates. Indian Oil Corp’s Ennore terminal – the nation’s newest – is also expected to remain underutilized as significant pipeline progress is needed before the gas can be delivered to regions outside of Ennore or Manali, said FGE’s Rajendran. An IOC official said the Ennore terminal is connected to only three customers, including IOC subsidiary Chennai Petroleum Corp, Madras Fertilizers Ltd, and Tamil Nadu Petroproducts. It would take at least two years to build a pipeline to serve other Ennore customers, the official said. India has 16,000 km of gas trunk pipelines in operation, and 13,000 km more approved and in various stages of construction, said Satpal Garg, a member of India’s downstream regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB). In comparison, China’s most complete regional gas grid in the southwestern province of Sichuan and Chongqing municipality has a total length of 42,000 km. The PNGRB has awarded licenses to build city gas distribution networks across the country, targeting districts that cover about 70 percent of India’s population, Woodmac’s Chatterjee said. The government is also aiming to connect more than 10 million households with piped gas by 2020 from the current 4.8 million, with the city gas portion of India’s natural gas use expected to more than double to 15 percent of the overall gas market, Chatterjee said. “In the past, there were some problems in getting the state government approvals for example in Tamil Nadu and Kerala but ultimately it is in the interest of both the centre and the state government to have a pipeline as there will be (industrial) development in the state,” Garg said. “We are trying to convince the states to expedite clearance and granting the right of way for the pipeline,” he said. India’s National Clean Air Programme launched earlier this year, in theory, should boost natural gas usage in households, transportation, and power. In reality, the plan is not legally binding and provides few guidelines to reduce pollutants in the country, FGE and Woodmac analysts said. “India’s (LNG) demand will grow and has the potential to match China, but the path to get there will be slow,” an LNG trader familiar with the market said.
Residents, environmentalists to fight Croatia’s LNG terminal
Residents and municipal authorities on the Croatian island of Krk, a major tourist destination, have vowed to fight the construction of a floating liquefied natural gas (LNG) terminal due to begin in a few weeks. The government decided in January to co-finance the terminal at the town of Omisalj with 100 million euros ($112.95 million). The European Union is also providing 101.4 million euros for a project that aims to reduce Croatia’s dependence on Russian gas imports. Omisalj mayor Mirela Ahmetovic said the floating terminal violated urban planning rules, which come under the control of the municipal authorities. The government had also not conducted a proper environmental study, she said. The town has asked the Constitutional Court to assess whether a law the government recently approved to accelerate the project is unconstitutional, she added. Environmentalists in Omisalj managed to halt plans to build a port at the town for Russia’s oil exports 15 years ago. Croatian Energy and Environment Minister Tomislav Coric insists the project will not harm the environment. The terminal is due to start operating on Jan. 1, 2021, despite weak initial demand. So far it has received binding bids for just 0.52 billion cubic metres (bcm) of gas per year. Its overall capacity is planned at 2.5 bcm. The terminal targets southeastern and central European markets, besides Croatia which consumes 2.7 bcm of gas annually. An environmental group from Krk said the negative environmental effects of the floating terminal were clear. “Some 8,000 cubic metres of underwater rock must be removed with dynamite. Also, we have no guarantee that chlorine would not be involved in the regasification process. Both are potentially harmful to sea life and to water quality,” said Vjeran Pirsic from Eko Kvarner. Croatia’s gas production is falling and some 60 percent of its consumption is covered by imports from Russia, leading to calls for it to find new sources of energy supply. “Over time, liquefied natural gas supply prices are likely to get close to the cost of gas from a pipeline, especially if LNG from North Africa becomes available,” said Miro Skalicki, an energy expert.
Bangladesh extends deadline to submit plans to build new LNG terminal
Bangladesh will extend the deadline by three months for companies to submit expressions of interest (EOI) to build the country’s first onshore liquefied natural gas (LNG) terminal, two sources familiar with the matter said on Thursday. Rupantarita Prakritik Gas Co, the part of state-owned energy company Petrobangla that oversees LNG supplies, on Jan. 3 requested interest from potential terminal developers for a land-based LNG regasification terminal at Matarbari in the Cox’s Bazar district of southern Bangladesh. The initial EOIs were supposed to be due by March 20 but the companies hoping to take part asked for more time. “The deadline for submission will be extended by three months as potential developers sought more time,” one of the sources said. The EOI is for the design, engineering, procurement, construction and commissioning of a land-based terminal that can handle 7.5 million tonnes per year of LNG, including receiving, unloading, storage and re-gasification facilities. The project is expected to be built on a build-own-operate basis for 20 years, with ownership then transferred to the Bangladeshi government or a company nominated by the government at no cost. “We are getting huge response from companies,” the second source said, adding that companies from Japan, South Korea and India have indicated their interest. The onshore terminal, which can be expanded to 15 million tonnes per year in the future, is part of Bangladesh’s strategy to develop its gas sector with private companies, according to the document. The project developer will be required to arrange the necessary financing. Bangladesh began importing LNG from Qatar on a regular basis in last year through the country’s first floating storage and regasification unit (FSRU). It has scrapped plans to build additional floating LNG import terminals after its second FSRU comes online.
PNG cooking gas, CNG may get costlier from next month; govt set to raise prices
Domestic cooking gas bill and auto CNG prices may be in for a hike, as the government will likely raise the natural gas price by as much as up to 18% next month, said a report. The government is all set to revise domestic gas prices with effect from 1 April 2019, per the New Domestic Gas policy, 2014, which suggests revising natural gas prices every six months. The expected up to 18 per cent hike in the domestic natural gas prices might have an impact on manufacturing, travel, energy and inflation, said a report by CARE Ratings. “We believe the prices of domestic natural gas for the April 2019-September 2019 period will increase from the current $3.36/mmBtu to approximately, $3.97/mmBtu, resulting in an 18% increase,” said CARE Ratings in the report. The government is also set to revise the prices of natural gas produced in deep water and high pressure high temperature. The move will likely adversely affect consumers by leading to an increase the prices of CNG (compressed natural gas) used as auto fuel, and PNG (piped natural gas) used in households as cooking gas. It may also lead to increase in cost of manufacturing of urea and petrochemical, where natural gas is used as a feedstock; and may also hit producers of power sector and sponge iron industry, where it is used for the generation of energy, the report added. An increase in prices of domestic natural gas will also lead to a rise in wholesale price index (WPI) inflation, which gives 0.46 per cent weightage to the natural gas of the total 2.46 per cent weightage given to crude petroleum and natural gas. However, it will increase revenues for upstream gas exploration companies such as ONGC, OIL India, Vedanta and Reliance, said the report. New Domestic Gas price formula takes into account the prices of natural gas in USA (Henry Hub), UK (New Balancing Point), Canada (Alberta Gas) and Russia (Russian Natural Gas), where prices are market linked in each hub.
ONGC’s biggest oil fields including Mumbai High came close to being sold to private, foreign firms
State-owned ONGC’s nine biggest oil and gas fields including Mumbai High and Vasai East came tantalizing close to being sold to private and foreign companies but the plan was nixed after strong opposition from within the government, sources said. A high-level committee headed by Niti Aayog Vice Chairman Rajiv Kumar late last year considered “transferring” western offshore oil and gas fields of Mumbai High, Heera, D-1, Vasai East and Panna as well as Greater Jorajan and Geleki field in Assam, Baghewala in Rajasthan and Kalol oilfield in Gujarat to private/foreign companies. Multiple sources in Niti Aayog and government said, the plan to give away fields producing 95 per cent of India’s current oil and gas could not go through because of very strong opposition from Oil and Natural Gas Corp (ONGC) as well as some quarters within the government who found something amiss in the proposal. Besides the 9 fields, 149 marginal fields, that contribute about 5 per cent of the domestic production, were to be clustered and bid out. While ONGC opposed giving away on a platter to private/foreign sector what it discovered after years of toil and spending billions of dollars over last four decades, some in government were not convinced by the incremental potential toyed to get the proposal through, they said adding it wasn’t clear how the incremental output numbers were arrived at in absence of any real basin or field study by the panel. The proposal brought before the panel, which was appointed by Prime Minister Narendra Modi in October last year to boost stagnant output from aging fields of public sector oil companies, was to give private/foreign companies complete marketing and pricing freedom after getting from them an enhanced production profile for the fields. National oil companies (NOCs) were to get 10 per cent of incremental output over business as usual (BAU) scenario, sources said. Private and foreign companies have generally shied away from taking up exploration blocks and have instead been lobbying for getting a stake in producing oil and gas fields of ONGC and Oil India Ltd (OIL) saying they can raise output by bringing in capital and technology. NOCs, on the other hand, contend that they do not have pricing and marketing freedom and they too can get the technology provided the same is provided. The final report that the committee submitted on January 29, had watered down the proposal by recommending freedom to NOCs to choose field specific implementation model including farm out, joint venture or technical service model for raising output from the fields that contribute 95 per cent of the current output. Pricing and marketing freedom for any new field development plan that they bring was also recommended. Sources said, 64 small and marginal fields of ONGC and two of Oil India Ltd (OIL) were recommended to be bid out within four months and NOCs allowed to retain 54 others (49 by ONGC and 3 by OIL) where enhanced oil recovery/improved oil recovery schemes were under implementation. The recommendations have been accepted by the government. The overhauled policy notified by the government provides for complete marketing and pricing freedom for oil and gas produced from areas bid out in future bid rounds. Oil and gas acreage or blocks in all future bid rounds will be awarded primarily on the basis of exploration work commitment, it said adding companies will not have to share any profit with the government on oil and gas produced from less explored areas.
India’s petroleum products exports to hit 8-year low in 2019
India’s total exports of petroleum products, which account for over a tenth of the gross value of outbound shipments, are set to drop below the 1.2 million barrel per day (mbpd) mark in the current calendar year, the lowest level of annual exports in the past 8 years. The worrisome trend for export earnings is attributed to a robust rise in domestic demand coupled with a mega maintenance-led refinery shutdown slated for 2019. The country exported petroleum products – mainly petrol, diesel, naphtha, fuel oil and lubricants — worth $35 billion last financial year (2017-18). “Overall, heavier maintenance program is to be expected this year, which will affect refinery throughput. This, coupled with robust domestic demand (expected to grow at 235 mbpd for the year as a whole), would likely pull India’s total oil product exports below the 1.2 mbpd mark this year for the first time since 2010,” Jy Lim, Director of Asia-Pacific oil market analysis at S&P Global Platts told ETEnergyworld. He added domestic refinery upgradation will be required as India plans to shift to Bharat-VI standard fuel in April 2020 coupled with the upgradation required to meet the International IMO 2020 bunker fuel specifications. Refiners with planned maintenance in 2019 include Reliance Industries, Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and Indian Oil Corp (IOC), according to S&P Global Platts. IOC, the largest refiner, will complete its refinery upgradation activity by the second half of next fiscal (2019-20), B V Rama Gopal, the firm’s Director-Refineries told ETEnergyworld in an interview in February last month. According to Platts, India’s domestic petroleum product consumption reached 210 Million Tonne (MT) in 2018 and is expected to rise 4.8 per cent in 2019 on the back of increased demand for petrol, diesel and Liquefied Petroleum Gas (LPG). The impact of the twin factors – robust demand and refinery upgradation activities – is already visible in the export numbers of the current financial year. “India’s total oil product exports dropped by 355 mbpd (or 24 per cent) year-on-year to 1.1 mbpd in January 2019, marking it the sharpest year-on-year decline in 9 months and the lowest monthly level since April 2018,” Lim said. Data on exports sourced from Petroleum planning and Analysis Cell (PPAC), an arm of the oil ministry, shows the country’s petroleum products exports in January 2019 slumped 25 per cent to 4.5 Million Tonne (MT) as compared to 6 MT exported in the corresponding month a year ago. Overall, in the April-January period of 2018-19, the country’s petroleum products exports have suffered a drop of 8.70 per cent at 51.4 MT, as compared to 56.3 MT exported in the same last fiscal. PPAC attributes the hit suffered by petroleum product exports to a drop in out-bound shipments of petrol, naphtha, diesel, LOBS/lube Oil, Fuel Oil, bitumen and Vacuum Gas Oil due to increased domestic consumption of petrol, naphtha and diesel recorded this fiscal year. However, in value terms, petroleum exports increased 14 per cent to $32.6 billion during the April-January period of current fiscal as against $28.7 billion worth of exports recorded in the corresponding period of 2017-18. Largest export destinations for India’s petroleum products include Singapore, United Arab Emirates, Netherland, Malaysia, United States, Israel and Nepal, according to data sourced from the Directorate General of Commercial Intelligence and Statistics (DGCIS), an arm of the commerce ministry. India exported 8.96 MT of petroleum products to Singapore in the first ten months (April-January) of 2018-2019, as compared to 10.55 MT exported in the corresponding period last fiscal. During the same period, petroleum Products exports to UAE increased to 8.18 MT from 6.72 MT while exports to Netherland rose to 5.68 MT from 3.03 MT.
Indian Oil to receive second LNG cargo for new LNG terminal in May
Indian Oil Corp is set to receive a second liquefied natural gas (LNG) cargo for its new Ennore terminal in south India in May, two industry sources said. The 5 million tonnes per annum (mtpa) import facility at Kamarajar port on the outskirts of Chennai discharged its commissioning cargo more than a week ago, the sources said, with the next due in two months. It was not immediately clear if the company will issue a tender for the cargo. State-owned IOC bought a partial LNG cargo for delivery in late February from Swiss trader Gunvor. The commissioning cargo was delivered through the LNG tanker ‘Golar Snow’ from Qatargas. IOC could not immediately be reached for comment outside business hours. The company said in a statement on March 6 that the terminal had received all necessary clearances to start commissioning. Ennore is owned by IndianOil LNG, a joint venture of IOC, private equity fund IDFC Alternatives and ICICI Bank, according to IndianOil LNG’s website. The 51.5 billion rupees ($741 million) terminal is India’s fifth, and the first to be located on the east coast in south India. Currently, there is limited gas infrastructure in Tamil Nadu. The terminal is expected to spur industrial growth in the area with the re-gasified LNG to be distributed to power generation plants, fertiliser plants and other industrial units.
India’s Gail CEO calls for more flexibility in U.S. LNG contracts
Gail India called on U.S. liquefied natural gas (LNG) producers to offer more flexible contract terms as the state-owned gas distribution gas company hunts for supplies from the middle of the next decade. India last year was the fifth largest importer of U.S. LNG and natural gas is projected to double its share of the nation’s energy mix by 2030 as oil-fired power plants convert. Shri B.C. Tripathi, chairman and managing director of Gail India, said on Wednesday at the CERAWeek energy conference his company is in discussions with U.S. gas exporters to acquire new LNG supplies from 2024-2025. “Traditional suppliers like Qatar or Russia have shown a lot of flexibility in recent past where they have modified their contracts, re-negotiated their contracts, aligned them to the market,” Tripathi said in a brief interview. “However, the U.S. contracts are purely a tolling model. Their tolling fee is fixed,” he said, adding that U.S. LNG becomes less competitive against traditional supplies when oil prices drop. The company has 20-year LNG contracts to buy 5.8 million tonnes per year of U.S. LNG, split between Dominion Energy Inc’s Cove Point plant and Cheniere Energy Inc’s Sabine Pass facility in Louisiana. Gail currently sends up to 75 percent of its U.S. LNG supplies back to India, Tripathi said, and sells the rest into the spot market. All the LNG will eventually be shipped to India when more gas pipelines and regasification terminals are completed, he said. Natural gas is expected to account for 15 percent of India’s energy mix by 2030, up from the current 6.2 percent, MM Kutty, secretary of India’s Ministry of Petroleum and Natural Gas, said earlier in the week. Half of that demand will be met by LNG imports, he said. The world’s fourth largest energy consumer is replacing oil-fired power plants with gas and is building pipelines so that piped gas can reach 70 percent of its population. India also aims to expand the number of compressed natural gas (CNG) refueling stations by 10-fold to 10,000.