Sinopec may ink 20-year LNG deal with Cheniere when trade spat ends
China Petroleum and Chemical Corp plans to sign a 20-year liquefied natural gas (LNG) supply agreement with Cheniere Energy once China and the United States end their trade dispute, two sources with knowledge of the matter said on Wednesday. Cheniere and China Petroleum and Chemical, known as Sinopec, reached a consensus in late-2018 on commercial terms after months of negotiations, but the signing of the deal was held back by the ongoing trade friction between the world’s top two economies, one of the sources, who has direct knowledge of the matter, told Reuters. “Without the trade spat, the deal should have been signed some time ago,” the source said, declining to be named because the matter is not public. In recent weeks, Beijing and Washington appear to have moved closer to a deal to end a bruising eight-month dispute that has seen the countries slap tariffs on billions of dollars worth of the other’s good. A resolution is widely expected to include stepped-up Chinese purchase of U.S. goods. Sinopec intends to buy close to 2 million tonnes a year of LNG from Houston-based Cheniere starting 2023, the two sources added, without giving a deal value. Cheniere may start delivering some supplies before 2023, said the second of the two sources. Based on the delivered cost of U.S.-sourced supplies into east China in January at $8.30 per million British thermal units given by Chinese customs, the 20-year deal would amount to roughly $16 billion. Sinopec and Cheniere both declined to comment on the status of a deal. The Wall Street Journal reported on Sunday that as part of a trade deal with the United States, China would buy $18 billion worth of natural gas from Cheniere. Officials from Cheniere visited Beijing in late February, said a third source, who was also familiar with the matter. Sinopec, a late comer to China’s LNG scene compared to domestic rivals China National Offshore Oil Corp (CNOOC) and PetroChina, has said it wants to more-than double its receiving capacity over the next six years to around 41 million tonnes annually, by building three new terminals along China’s east coast and expanding existing facilities. China, the world’s second-largest LNG buyer after Japan, imported just over 2 million tonnes of the super-chilled fuel in the first nine months of 2018 from the United States, according to Chinese customs. Imports have since almost dried up after Beijing announced a 10 percent tariff on U.S. LNG in September, with sporadic shipments in November and January, amid an escalation of the tit-for-tat trade war. In February 2018, before the trade war started, PetroChina’s parent company CNPC signed a 20-year deal with Cheniere to buy 1.2 million tonnes of LNG a year through 2043, with a portion of the supply beginning in 2018. Thanks to its shale boom, the United States is on track to become the world’s third-biggest LNG exporter by capacity in 2019, after Australia and Qatar. Cheniere said last week it planned to make a final investment decision to build a sixth liquefaction train at its Sabine Pass LNG export terminal in Louisiana in the coming months.
Essar Oil & Gas gets environment clearance to begin shale gas exploration
Essar Oil & Gas Exploration and Production (EOGEPL) has received environment clearance for exploring shale gas reserves in its Raniganj block in West Bengal, an official said. This follows the government’s decision to allow operators freedom to explore both conventional oil and natural gas as well as non-conventional sources such as coal-bed methane (CBM) and shale reserves within an exploration acreage. Previously, companies could explore only oil and natural gas or CBM, depending on their licence for the block. The official said the expert appraisal committee (EAC) in its January 29 meeting allowed Essar to drill 20 wells to explore shale gas in its Raniganj CBM block. It has been awarded an exploration lease for shale gas, CBM and hydrocarbons in the Raniganj block. EOGPL has got approval to drill 20 shale wells at a cost of Rs 10 crore. To start with, it will drill five wells in the block to test the shale potential. When contacted, company Managing Director and CEO, Vilas Tawde said: “We will start off with collecting the data. For this, we will need to drill the coal, identify the sweet spot and then drill horizontally for almost a km. Thereafter, we will analyse the coal, the shale, the strength of the shale, and the required volume.” “If this exploration is successful, we plan to drill around 220-250 wells that will require an investment of Rs 7,000 crore,” he said. EOGEPL has invested around Rs 4,000 crore in the Raniganj block, which will produce 1.7 million standard cubic metres per of gas from coal seams (CBM) in the next two years and ramp up to 2.5 mmscmd in the next three to four years. With the policy for simultaneous exploration of unconventional resources in place, EOGEPL is looking into the shale prospect in the same blocks, which is in the range of 7.7 trillion cubic metres. The official said the company could spend up to $1 billion in development of shale reserves if the exploration programme was successful. Essar has already signed an agreement to sell its entire production from the Raniganj East CBM block to state gas utililty GAIL India Ltd. Besides the Raniganj CBM block, the company also has a Mehsana CBM block in Gujarat, where it plans to drill six wells. The project will be completed in 18 months.
IGL to supply piped cooking gas, CNG in three UP districts
City gas distributor, Indraprastha Gas Ltd (IGL), today announced it has received the Letter of Intent from the downstream petroleum regulator to lay city gas distribution (CGD) network in the districts of Fatehpur, Hamirpur and the unauthorised areas of Kanpur in Uttar Pradesh. The three geographical areas were bid out under the recently held 10th round of CGD bidding conducted by the Petroleum and Natural Gas Regulatory Board. The company said in a statement the project is aimed at providing supply of compressed natural gas (CNG) and piped natural gas (PNG) in these districts and it is expected that the first CNG station and piped gas connection would be made available within a year. Commenting on the development, IGL’s Managing Director E S Ranganathan said that the company plans to set up seven CNG stations and provide PNG connections to 14,400 households in the next two years across the geographical area. “Along with domestic kitchens, IGL would also be providing gas connections to industries and commercial establishments like hotels, restaurants, and hospitals in the region,” he said. IGL is a joint venture between GAIL (India) and Bharat Petroleum Corp (BPCL). The firm currently supplies CNG and PNG in Delhi, Gautam Buddh Nagar, Ghaziabad, Rewari, and Gurugram. The company operates a CGD infrastructure consisting of over 12,500 kilometers of pipeline network and 482 CNG stations. It meets the fuel requirements of 10.5 lakh CNG vehicles and supplies PNG to 10 lakh households in Delhi and adjoining National Capital Region towns.
MSRTC to run buses on LNG, will save Rs 10 billion, says transport minister Diwavkar Raote
The Maharashtra State Road Transport Corporation (MSRTC), reeling under severe losses has decided to convert 18,000 buses in its fleet to run on Liquefied Natural Gas (LNG). The conversion will save Rs 10 billion annually, said transport minister Diwakar Raote. He was speaking during the foundation laying ceremony of a new bus stand and lodging facility for passengers at Pandharpur. The dignitaries from the Varkari community performed the rituals. Speaking at the programme Raote said, “The conversion will require technical modifications in the buses. In the first phase, 18,000 buses from different depots across the state will be modified. The cost of modification for each bus is around Rs 0.15 million. The modification will be completed in the next few months to operate the buses on LNG.” Raote hailed the decision as eco-friendly, though it involves minor repairs and modifications in the buses. “MSRTC will set up LNG pumps on the outskirts of the depots so that the private vehicle owners would also be able to buy the fuel from the pumps. The conversion will save annual expenditure of Rs 10 billion on diesel. Maharashtra is the first state in the country to run its buses on LNG,” Raote said. Referring to the passenger load during annual Pandharpur pilgrimage, Raote said that the revenue earned during the pilgrimage is sufficient to pay the entire staff. “Since it is the most important pilgrimage, MSRTC has to manage it separately. The Corporation has decided to pay Rs 750 pocket money to the wards of employees and also to pay for their higher studies abroad. The Corporation has launched Rs 0.1 million Fixed Deposit scheme for the daughters of the employees and 1,000 employees have been benefited from the scheme till now,” Ravate said. Losses to the tune of Rs 30 billion The MSTRC has an accumulated loss of Rs 30 billion. It suffered a massive setback as several buses were damaged during different agitations over the last year. The Corporation caters to more than 5 million passengers every day, had to suspend the services during the rallies and violent agitations. It caused revenue loss to the Corporation, Raote said. He said that the Corporation suffered losses to the tune of Rs 3.5 million during the Maratha Reservation agitation. Fondly called ST, it is the lifeline of the common man. The Corporation is serving the people despite heavy losses. He said that 175 buses were damaged during Maratha Kranti rallies across the state, while services from many depots were suspended for many days. This caused the revenue loss to the tune of Rs 21.5 million.
Petroleum Minisater dedicates three ONGC projects in Assam
The ONGC board accorded approval for the multi-specialty 300 bed-hospital project to be undertaken in three phases. Minister of petroleum and natural gas and skill development and entrepreneurship Dharmendra Pradhan inaugurated three mega projects of ONGC in Assam. Along with two engineering projects of ONGC related to oil processing and transportation, he also dedicated a multi-specialty hospital to the nation at Rajabari in Sivasagar in Assam. The ONGC hospital, the PSU’s single largest corporate social responsibility (CSR) project, is aimed at providing quality and affordable medicare to the people of Sivasagar and upper Assam. The ONGC board accorded approval for the multi-specialty 300 bed-hospital project to be undertaken in three phases. The first phase of this hospital building, with 50 beds, at a cost of Rs 990 million is getting ready for functioning. Competent and qualified doctors have already been recruited from the state of Assam by Dr Babasaheb Ambedkar Vaidyakiya Pratisthan (BAVP), the COM (Construction, Operation and Management) partner engaged towards implementing this project. Further, the recruitment process for paramedics, nurses and other support staff from Sivasagar and adjoining areas has been initiated. He also dedicated to the nation the effluent treatment cum water injection plant at Lakhmani oilfield of ONGC. This ONGC plant, built at an investment of Rs 880 million, will handle the effluent produced at Lakhmani and Demulgaon fields and after treatment inject the water into the reservoir for pressure maintenance.
Indonesia plans to sell 10 cargoes of LNG to spot market in H1 2019
Indonesia plans to sell 10 cargoes of LNG to spot market in the first half of 2019, said energy ministry official Djoko Siswanto, who is director general of oil and gas. There will be 1 cargo in April and 2 cargoes in May from Bontang LNG plant, 4 cargoes in June from Tangguh LNG plant, and 3 cargoes in March, May, and June from Donggi Senoro LNG Plant, he told a forum on Tuesday. Indonesia has 40 excess cargoes of LNG until 2025, Siswanto said.
India is consuming LPG like never before! What’s driving this phenomenon?
India is now the second largest consumer of liquefied petroleum gas (LPG) in the world, with LPG consumption in the country posting an average growth of 8.4%. And a lot of the credit goes to the government’s push to provide clean cooking fuel to every household through the Pradhan Mantri Ujjwala Yojana (PMUY). As on February 1, Oil Marketing Companies (OMCs) had released more than 63.1 million LPG connections under the scheme. In fact, a record 40.7 million new LPG connections were added in the current fiscal year alone, a jump of 45% over 2017-18, The Business Standard reported. Moreover, the three state-owned oil marketing companies – Indian Oil Corporation (IOC), Bharat Petroleum Corporation, and Hindustan Petroleum Corporation (HPCL) – have collectively set a target of adding 42.5 million customers by the end of this month. On the flip side, the mushrooming number of beneficiaries – up 77% since March 2015 – under the scheme is increasing the Centre’s subsidy burden. Under the PMUY scheme, the government provides a subsidy of Rs 1,600 to state-owned fuel retailers for every free LPG gas connection that they give to poor households. The LPG subsidy during the first nine months of the current fiscal is reportedly already 23% higher than last year’s figure – the Modi government shelled out Rs 25,700-crore subsidy over April-December 2018. The Budget for 2019-20 had, however, provided only Rs 202.83 billion in the Revised Estimates for FY19. Furthermore, the government expects the LPG subsidy to rise over 62% to Rs 329.89 billion for 2019-2020. A part of this is expected to be rolled over from the current year. Last week, IOC hiked LPG price by Rs 2.08 per cylinder and non-subsidised gas by Rs 42.50 per bottle, after three straight monthly reduction in rates totally around Rs 13. A 14.2-kg subsidised LPG cylinder now costs Rs 495.61 in Delhi while a non-subsidised one costs Rs 701.50. Those with family income of below Rs 1 million get subsidy for 12 cylinders. For March, subsidy on LPG cylinders is Rs 206 in Delhi. “With the number of consumers rising exponentially, it is time the government should consider further rationalising LPG subsidy,” an industry expert told the daily. The latest Petroleum Planning and Analysis Cell (PPAC) data reveals that total LPG consumption recorded a growth of 11.1% during January 2019 and a cumulative growth of 5.7% for the April-January period. “PSU OMCs together have 252.1 million active LPG customers in the domestic category which are being served by 22,654 LPG distributors. The LPG coverage of the country, estimated on the basis of active domestic connections and estimated households as on January 1, 2019, is around 89.9%,” read its LPG Profile report. To cater to the increased customer base, 3,030 LPG dealerships were reportedly added this year, compared to 724 in 2017-18. In January 2019, the northern region bagged the highest share in total LPG consumption (32.8%), followed by the southern region and western region at 27.2% and 22.9%, respectively. The eastern region and the northeast continue to lag behind at 19% and a miniscule 2%, respectively. Of the total number of consumers, around 242.7 million are reportedly covered under the direct benefit transfer of LPG Scheme (DBTL), or PAHAL. While speaking at the Asia LPG Summit last month Oil Secretary MM Kutty had claimed that as per the ministry’s projections and forecasts, LPG consumption in India is expected to grow 34% to 30.3 million tonnes by 2025 and 40.6 million tonnes by 2040.
Torrent Power seeks LNG cargo for March delivery
India’s Torrent Power is seeking a liquefied natural gas (LNG) cargo for delivery in March, two industry sources said on Tuesday. The utility is seeking the cargo for delivery into Dahej terminal on March 26 on a delivered ex-ship (DES) basis, one of the sources said. Offers are due by March 5, the source added.
Rs 1.2 lakh crore investment committed in city gas rollout over 8-10 years
As much as Rs 1.2 lakh crore of investment has been committed by firms like IOC, Adani Gas and Torrent in a massive rollout of CNG stations and cooking gas connections to households over the next 8-10 years, oil regulator PNGRB said Friday. The move is likely to expand coverage of city gas to 70 per cent of the country’s population. PNGRB has in last six months awarded licenses for setting up city gas distribution networks in 136 geographical areas or GAs in two bid rounds that will expand the network of CNG stations in the country to 10,000 from current 1,500 and piped natural gas connections to household kitchens to 5 crore from current 5 lakh, PNGRB Chairman D K Sarraf said. While Rs 70,000 crore investment was committed in 86 GAs awarded in the 9th city gas bid round in August last year, another Rs 50,000 crore was committed in the 50 GAs awarded in the 10th round Friday, he said. Oil Minister Dharmendra Pradhan handed over letter of intent to the winners of the 10th round which included firms like Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL), Torrent Gas and Adani Gas. “Just 20 per cent of the population was covered by city gas distribution network in 2014 and now after award of 10th bid round, this will reach 70 per cent,” he said. “After 10th round, the coverage of city gas network will extend to 402 districts in the country”. While 86 Geographical Areas or GAs, made up of 174 districts, were offered for bidding in the 9th round that concluded in August last year, 50 GAs, comprising of 124 districts, were offered in the 10th round. “225 bids from 25 entities were received up to February 5, 2019, i.e., the bid closing date (for the 10th round). And the PNGRB finalised the bids in a record time of 21 days,” Sarraf said. Prior to this, city gas distribution (CGD) licences had been given for 178 GAs covering 280 districts (263 complete and 17 part) spread over 26 states and UTs. These covered about 50 per cent of India’s population (as per 2011 census) and 35 per cent of its geographical area. State-owned IOC won licences to retail gas in 10 cities, while HPCL won rights for nine towns in the 10th city gas bid round. IOC won city gas distribution licences for nine cities, most of them in Bihar and Jharkhand, on its own and one in a joint venture with Adani Gas. HPCL, a subsidiary of state-owned Oil and Natural Gas Corp (ONGC), won licences to retail CNG to automobiles and piped natural gas to households in nine cities in Uttar Pradesh and West Bengal. A consortium of LNG Marketing Pte Ltd and Atlantic Gulf & Pacific Company of Manila Inc won rights for nine cities in Andhra Pradesh, Karnataka, and Kerala. Gujarat Gas Ltd won rights for six cities, while state gas utility GAIL India’s unit GAIL Gas Ltd won rights for four. Indraprastha Gas Ltd and Torrent Gas won rights for three cities each, while Adani Gas and Bharat Gas Resources Ltd, a subsidiary of state-owned Bharat Petroleum Corp Ltd (BPCL), bagged two cities each. “In the 10th bid round 2 crore piped natural gas connections have been committed to be given and 3,500 CNG stations will be set up. Besides, 58,000-inch kilometre of steel pipeline will be laid for the supply of gas,” Sarraf said, adding this along with commitments made in the 9th bid would help increase piped cooking gas connections 10-folds to 5 crore and CNG stations to 10,000 from current 1,500. Oil Secretary M M Kutty said the massive expansion of city gas distribution network is as part of government efforts to raise the share of natural gas in the energy basket to 15 per cent by 2030 from current 6.2 per cent. Natural gas is cleaner and environment-friendly fuel and is intended to replace some of the polluting coal and liquid fuels consumed currently. With the completion of 10th bidding round, CGD would be available in 228 GAs comprising 402 districts spread over 27 States and Union Territories covering approximately 70 per cent of India’s population and 53 per cent of its geographical area.
Gail chosen for Vedanta’s Barmer gas output buy
The Centre has nominated state-run GAIL to buy the gas output from Vedanta’s prolific Barmer block, which has recently begun pumping the energy resource after accounting for a fourth of India’s domestic crude oil production. The block, which would produce up to 4 million metric standard cubic meters a day (mmscmd), must sell the output to an entity chosen by the government. The production sharing contract for the Barmer block gives the producer pricing freedom but not marketing freedom. A long-drawn negotiation between GAIL and Vedanta hasn’t yet yielded an agreement, underscoring how hard it can be to settle on a rate in the absence of a widely acceptable domestic-market benchmark. “We are in the middle of a productive commercial discussion, which will enable all stakeholders to optimise revenue, investment, and production. We cannot, however, comment on speculation about commercial discussions since these are confidential,” Vedanta said in an emailed response to ET’s query. People familiar with the negotiations said there was a yawning expectation gap between the two parties as the seller has been demanding a rate equal to that of imported liquefied natural gas (LNG), while the buyer favours the domestic formula price or a reasonable margin on top of the cost of production. For producers and buyers, there are at least five gas price reference points in the country. A domestic formula price of $3.36 per million metric British thermal unit (mmBtu) applies to most gas produced in the country. Then there are the following: The maximum rate of $7.67 for gas from difficult fields, prices discovered in limited auctions for gas that is difficult to extract, imported LNG rates, and economically viable rates submitted in field development plans (FDP) by producers. In their FDPs submitted to the upstream regulator, producers mention the price at which developing a field would be viable. These prices are rarely publicised and so are less likely to become the basis of negotiations between a producer and buyer. Producers demand higher rates equal to that of imported LNG, pointing out that the rising local appetite for LNG shows consumer willingness to pay a higher price. But buyers say high prices can dent local demand for gas and hurt industries.