Milestones unmet, Nikhil Merchant’s Swan asks govt oil firms to ease norms
In a letter dated October 13, Swan’s special purpose vehicle Swan LNG Private Ltd wrote to users Indian Oil Corp, Oil & Natural Gas Corp, Bharat Petroleum and Gujarat State Petroleum Corp to consider fixing the project’s “Effective Date” as December 8, 2016. Rejected once and unable to meet key milestones, including financial closure, even 17 months after deadline, Swan Energy Ltd, promoted by influential Gujarat businessman Nikhil Merchant, has asked state-run oil companies to give him a fourth extension. And approve a new commissioning date of March 2020 for its proposed LNG regasification terminal at Jafrabad in Gujarat. The Rs 5,117-crore plant is meant to convert LNG, imported by these firms, into its gaseous form so that it can be piped to domestic end-users. At a capacity of 5 million tonnes, it will bring Swan an annual revenue of an estimated Rs 14 billion. In a letter dated October 13, Swan’s special purpose vehicle Swan LNG Private Ltd wrote to users Indian Oil Corp, Oil & Natural Gas Corp, Bharat Petroleum and Gujarat State Petroleum Corp to consider fixing the project’s “Effective Date” as December 8, 2016. As per the agreement between Swan and these four firms, commissioning of the plant is envisaged 33 to 39 months from the Effective Date — which means the four have to decide on their overseas LNG suppliers and tie up with their domestic natural gas buyers by March 2020. The four are yet to reply to the October letter but a similar request made by Swan on September 1 was turned down at a joint meeting of the four companies on September 21. Their argument: Effective Date should be when the project achieves financial closure and all key conditions met. Swan attributed its delay in financial closure to “recent unwanted developments i.e. banking frauds, high NPAs, weak capital levels with public sector banks”. But the four firms argued that they would suffer either way if the commissioning was set for March 2020: they have to start using the terminal by then or pay “Use or Pay” charges. That would entail paying 75 percent of the tolling charge (Rs 57.38 per million British thermal units) even without using the terminal. Also, they would have to tie up with both the LNG supplier and buyers in anticipation of Swan’s readiness. And, in case of further delay by Swan, they would end up paying a penalty to both. “In case Swan is unable to obtain financial closure in the coming months, the User’s liabilities will not only be towards ‘Use or Pay’ to Swan LNG but also to the LNG supplier under ‘Take or Pay’ clause ($8-$9 per mBtu) and regassified LNG buyer under ‘Supply or Pay’ clause ($9-$10 per mBtu),” they warned. That’s why, the firms argued, the “effective date” should be when Swan LNG notifies in writing that it has achieved all six pre-conditions, including financial closure. And decided to give Swan LNG time until December 31 to satisfy all pre-conditions as requested on September 1. Swan was to achieve all key pre-conditions by June 23, 2017 — a year after signing of the regassification agreement with the foundation users. When contacted, Swan Energy Managing Director Nikhil Merchant told The Indian Express that Swan LNG had achieved financial closure for a part of the project. He claimed that contract for port facilities had been since awarded and the tie-in for regassified LNG transporter was the foundation users’ responsibility. On his request for a new Effective Date, Merchant said that it should be considered on the basis of the letter of intent issued by the Gujarat Maritime Board which has granted space for the project. “The Concession Agreement (issued by GMB) supersedes all agreements and therefore this should be considered for the effective date,” he said. Swan LNG’s letter, however, said that if the users insisted on fulfilment of each of the conditions, the commissioning date would have to be postponed to mid-2021. The four companies had thrown their weight behind Swan’s proposed terminal by signing agreements on June 23, 2016 to use the proposed terminal to bring in their own LNG and get it converted into gas by paying Swan a tolling fee of Rs 57.38 per mBtu. While ONGC, IOC and BPCL have each taken 1 million ton capacity in the proposed plant, GSPC has booked 1.5 million tons.
Petronet LNG to invest Rs.21 billion at Dahej terminal
Petronet LNG Ltd, India’s top gas importer, plans to invest Rs.21 billion to expand its terminal capacity in Dahej, Gujarat, from 15 million tons per annum (MTPA) to 20MTPA in the next two or three years, said two officials close to the development. Of the total, Rs.13 billion would be used to expand the Dahej terminal, while Rs.8 billion will be spent on building LNG storage tanks, they said, requesting anonymity. Petronet LNG, which built India’s first LNG receiving and regasification terminal at Dahej, operates another terminal in Kochi. The Kochi terminal has a capacity of 5 MTPA. The company is in the process of building a third terminal, at Gangavaram, Andhra Pradesh. An investment proposal for the expansion in Dahej has been recently submitted to the Gujarat Maritime Board—the regulator for all the non-major ports and maritime activities in Gujarat, confirmed a senior Gujarat government official, who did not wish to be named. A Petronet LNG official declined to comment. A company official did not respond to an emailed query. As a precursor to the ninth Vibrant Gujarat Global Summit, scheduled during 18 to 20 January in Gandhinagar, GMB had organized a road-show in Mumbai on 21 December. The road-show was aimed at highlighting the competitive strength of Gujarat and attracting investments in the state’s maritime sector, said a GMB official, requesting anonymity. “The investment proposal by Petronet LNG shows that Gujarat is still a leader when it comes to fresh investments,” the official said. Prime Minister Narendra Modi had in October inaugurated a LNG terminal promoted by GSPC LNG Ltd, a subsidiary of Gujarat State Petroleum Corp. Ltd. The project is the third such LNG re-gasification project in the state after Petronet LNG’s Dahej LNG terminal and the Hazira project of Shell Gas BV, a unit of Royal Dutch Shell Plc. Shapoorji Pallonji group and Swan Energy have also announced plans to set up LNG terminals in Gujarat. Consumption of natural gas in India has increased by 17.1% on a year-on-year basis during FY19 (April-October period), Care Ratings said in a 19 December report. Increase in demand and fall in domestic production has led to an increase in imports of LNG by 12.7%. In the current fiscal year, India imported LNG mainly from Qatar (47%), Nigeria (17%), the US (6%), Angola (6%) and Australia (6%). R-LNG or re-gasified-liquefied natural gas has catered to 47% of the natural gas consumption during the April to October period. While Petronet’s Dahej terminal has a long-term LNG sourcing contact with RasGas, and with ExxonMobil for the Kochi Terminal, GAIL’s Dhabol terminal has a 20-year contract with Cheniere Energy. Hazira LNG has sourced cargoes from 17 liquefaction facilities across the globe, ranging from Peru LNG at the extreme west to Sakhalin LNG in the extreme east. Unlike Dahej, Kochi and Dhabol, Hazira terminal is geared more towards short and mid-term contracts instead of long-term. “India is scheduled to add 27.5 million metric tonnes per annum additional R-LNG terminal capacity in the coming few years depending on the techno-feasibility of the project. The current regasification facilities are all located on the west coast of the country. With the proposed new plants which will be set up on the east coast of India, the disparity in the supply of LNG should diminish,” adds Care Ratings.
Kuwait light crude output expected to rise to 250,000 bpd in 3 years
Kuwait’s production of light crude is expected to rise to 250,000 barrels per day in three years’ time and to 300,000 bpd by 2023, Ali Hussain Al-Kandari, manager of production and projects at Kuwait Oil Company said on Tuesday. Light crude output is currently 180,000 bpd, with natural gas at 0.5 billion cubic feet, Kandari said in remarks carried by the state news agency.
World’s largest floating LNG platform starts production in Australia
Royal Dutch Shell said on Wednesday it has begun output at its Prelude floating liquefied natural gas (FLNG) facility in Australia, the world’s largest floating production structure and the last of a wave of eight LNG projects built in the country over the last decade. Though the project started up later and cost more than originally estimated, it is expected to further cement Australia’s lead as the world’s biggest LNG exporter, after the country took the crown in November. In a statement, Shell said wells have now been opened at the Prelude facility, located 475 kilometres north-north east of Broome in western Australia. This means Prelude has now entered start-up and ramp-up, the initial phase of production where gas and condensate – which is an ultra-light form of crude oil – is produced and moved through the facility. Prelude is expected to have an annual LNG production capacity of 3.6 million tonnes, 1.3 million tonnes a year of condensate and 400,000 tonnes a year of liquefied petroleum gas (LPG). Shell did not immediately respond to a Reuters query on when first LNG will be exported from the facility, but analysts estimate exports to start by early next year, with condensates likely to start first. “First LNG cargo is still several weeks assuming all proceeds as planned, but the timing of first cargo and pace of ramp-up is still subject to technical risk,” said Saul Kavonic, energy analyst at Credit Suisse in Sydney. “Given Prelude’s novelty, geographic conditions and challenges, it may be subject to greater risk to timeline from wellhead production to first cargo than an average LNG project,” he said. “We expect Shell to seek to get it done right, rather than rush things.” Shell owns 67.5 percent of the project, while Japan’s Inpex Corp, Taiwan’s CPC Corp and Korea Gas Corp hold the rest of the shares. Australia overtook Qatar as the world’s largest exporter of LNG for the first time in November, after the start-up of a number of export projects over the past three years, most recently the Ichthys facility. The start-up of Prelude, following the ramp-up in production at Ichthys and Russia’s Yamal LNG is expected to put pressure on the Asian market next year, said Kittithat Promthaveepong, a senior analyst at FGE.
OPEC in a ‘whatever it takes’ moment to prop up oil
OPEC hasn’t even started implementing its new six-month agreement to cut output, and already members responsible for most of the reductions have pledged to extend or even deepen it. Officials from Iraq, Kuwait and the United Arab Emirates agreed with Saudi Arabia’s expectation that the group, along with Russia and other oil producers, will extend the agreement for another six months. The UAE’s energy minister, while stressing that the 1.2-million barrel-a-day cut will clear an inventory buildup in the first half, hinted additional curbs could be discussed. “The planned cuts have been carefully studied, but if it doesn’t work, we always have the option to hold an extraordinary OPEC meeting and we have done so in the past,” Suhail Mohammed Al Mazrouei, who is also OPEC president, said in Kuwait. “If we are required to extend for another six months, we will, if it requires more, we always discuss and come up with the right balance.” Last week, oil capped its biggest weekly decline since 2016 on concerns that weakening economic growth and surging US supply will lead to a surplus next year, overwhelming OPEC’s efforts to stabilize the market. The slide continued even after the Organization of Petroleum Exporting Countries and its partners surprised traders with the size of the supply reduction announced on December 7. At a press briefing in Kuwait, Iraqi, the UAE and Algerian energy ministers took turns repeating the message that OPEC will deliver its 800,000 barrels per day cut and continue their cooperation with other producers to balance supply and demand. Iraq’s oil minister Thamir Abbas Ghadhban said his country’s new membership into the OPEC+ monitoring committee “indicates that we are serious about meeting our commitments that will exceed what we’ve complied with in the past.” OPEC cuts may end up being deeper than agreed because of planned maintenance and production snags in some member countries, Mazrouei said. Conflict, sanctions and aging oil fields have been factors that dragged on output in Libya, Nigeria, Iran and Venezuela in recent years. Saudi Arabia has volunteered to take the lead in trimming production by more than it has agreed. The world’s biggest oil exporter plans to pump 10.2 million barrels a day in January rather than the 10.3 million allotted to it in the OPEC+ agreement. “Over-conformity is not new to Saudi Arabia,” said the kingdom’s OPEC governor Adeeb Al-Aama. “Our conformity with the previous cuts was 120% between January 2017 and May 2018.”
China’s LNG imports hit record in November
China’s liquefied natural gas (LNG) imports hit record levels in November, customs data showed on Sunday, with traders rushing to buy the fuel as households and businesses crank up their heating over the freezing winter months. LNG imports totaled 5.99 million tonnes in November, up 48.5 percent from the same month last year, data from the General Administration of Customs showed. That surpassed the previous record of 5.18 million tonnes hit in January this year. China has been pushing to switch parts of the country to gas for heating, shifting away from coal as it pushes to clean up its environment. For the first 11 months of 2018, LNG imports were up 43.6 percent from a year earlier to 47.52 million tonnes, on track to beat 2017’s annual record of 38.13 million tonnes. Meanwhile, Chinese exports of gasoline and diesel fell in November from the year before, the data showed, with local refiners reducing production as profit-margins fall. China exported 1.23 million tonnes of diesel in November, down 37.5 percent year-on-year. Gasoline exports last month fell 39.2 percent year-on-year to 630,000 tonnes.
Israel, Greece, Cyprus to ink natural gas pipeline deal
Prime Minister Benjamin Netanyahu on Thursday said that Israel, Greece and Cyprus will sign an agreement early next year to build a pipeline to carry natural gas from the eastern Mediterranean to Europe, while the United States pledged its support for the ambitious project. The $7 billion project, expected to take six or seven years to complete, promises to reshape the region as an energy provider and dent Russia’s dominance over the European energy market. It also could curtail Iranian ambitions to use Syria as a gateway to the eastern Mediterranean. Speaking at a summit with the Greek and Cypriot leaders in southern Israel, Netanyahu said the three nations reaffirmed their commitment to the pipeline and discussed “important aspects” of the project. Italy is also a partner in the pipeline’s planning. Cyprus President Nicos Anastasiades said the project is waiting for a green light from the European Union to move forward. “We’re going to sign formally, officially, this agreement in a few months,” he said. In another boost for the project, U.S. Ambassador David Friedman hailed the pipeline as integral to the “stability and prosperity of the Middle East and Europe,” and urged all countries in the region to ensure its success. Washington is eyeing the east Mediterranean with renewed interest. In a meeting with the Greek foreign minister earlier this month, U.S. Secretary of State Mike Pompeio called the region “an important strategic frontier” for Washington, which is working to strengthen its relations with “democratic allies there like Greece and Cyprus and Israel.” Israel has been developing natural gas fields off its Mediterranean coast for the past decade. Its “Tamar” field already is operational, while the larger “Leviathan” field is expected to be operational next year. While most of its gas is used domestically, it has signed export deals with Egypt and Jordan and has its eyes on the larger European market. The proposed pipeline would allow Israel and Cyprus to export their recently discovered offshore reserves to Italy and eventually to the rest of Europe. Greece, which would act as a conduit for the gas to the continent, could also use the pipeline to convey any hydrocarbons potentially found in its own waters. This would potentially transform the countries’ economies while also diversifying Europe’s gas supply and reduce its dependence on Russia. Developing the region’s hydrocarbon reserves would also serve to curb Teheran’s bid to “open a window” to the east Mediterranean through Syria, Assistant Secretary of State Wess Mitchell told Greek language newspaper Kathimerini in an interview published this week. At Thursday’s summit, the leaders offered no details of a construction timeline. The countries also pledged to cooperate in cyber security, while Israel and Cyprus signed a preliminary deal on technical cooperation and Israel and Greece reached a framework agreement on satellite technology.
German regulator removes LNG connection line from grid expansion plan
A line to connect a planned German terminal for liquefied natural gas (LNG) in Brunsbuettel to the bigger gas grid needs to be build by the project company, not the gas grid operator, Germany’s network regulator said on Thursday. The Bundesnetzagentur (BnetzA), following the completion of its 6.9 billion euro ($7.9 billion) gas network expansion plan for 2018-2028, said the move did not preempt a decision on whether the planned terminal was needed or could be realised. German LNG Terminal, a joint venture of gas network operator Gasunie, tank storage provider Oiltanking, and storage tank company Vopak, plans to make an investment decision on the Brunsbuettel terminal next year.
Fuel at your doorstep: Indian Oil launches mobile dispensers in Chennai
Indian Oil Corporation launched its ‘fuel at doorstep’ service in the city on Thursday, wherein fuel is dispensed through mobile dispensers similar to fuel tanks. The scheme was first started in Pune in May in a bid to ensure hassle-free supply of fuel to end users, thereby avoiding unnecessary fuel spillage, unsafe handling of fuel in containers/barrels and pilferage. A fuel delivery vehicle fitted with a mobile dispenser and 6,000 litre fuel tank was flagged off at the inaugural event at Chandini Enterprises, Indian Oil Petrol Pump, Kolathur by Indian Oil Corporation executive director R Sitharthan. At present industrial & bulk customers, who require fuel (diesel) must visit retail pumps to fill containers/barrels. “The customer can place orders through an android mobile application (REPOSE APP). The minimum order would be 200 liters and for quantities exceeding 2,500 liters, the receiver should have PESO license for storage,” a statement said. Once the customer places the order, it reaches the concerned dealer with details including the customer’s name, mobile number, quantity required, address and time of delivery. On receipt of the order, the mobile dispenser would reach the destination and the dispensing would commence through the automated unit only in the designated location. The dispenser would also carry fire extinguishers.
India mulls building natural gas reserves
India is considering building emergency stockpiles of natural gas, on the lines of strategic oil reserves, to deal with supply disruption amid the country’s growing dependence on fuel and its import. The government wants domestic consumption of natural gas, a cleaner fossil fuel, to rise two-and-a-half times by 2030 and is encouraging big public and private investments in gas production, import, transport and distribution infrastructure. Local demand increased 5.5% between April and October to 35.1 billion cubic meters, increasing dependence on imports to 47% of total consumption from 44% a year earlier. “Today, we consume very little gas but once new import terminals and pipelines are in place and new city gas licensees have rolled out their services across the country, there would be a sharp jump in the consumer base. Any supply disruption can have a huge impact,” said a person, explaining the rationale for building emergency gas storage in the country. India mulls building natural gas reserves The person is part of a panel formed by the petroleum and natural gas ministry to evaluate the need for strategic gas storage and prepare a plan to go about building and managing these. The panel has representatives from ONGC, GAIL and Oil Industry Development Board. “We would need to answer two key questions: First, how do we build the storage, and second, what would be the right business model to operate it,” the person said. The panel plans to hire consultants soon and hopes to finalise a report in about six months, he said. Most heavy gas consuming countries already have natural gas storage in place, primarily for supply security. About 30% of gas storage capacity is in the US, a major producer and consumer of natural gas. Russia, Ukraine, Canada and Germany together account for another 40%. China, a late entrant to the game, too is fast building gas storage facilities. About three-fourths of underground gas storage is in depleted gas and oil fields while the balance is distributed between salt caverns and aquifers. “The simplest way to start would be to launch a depleted field storage as it would be cheaper and less time-consuming than a salt cavern or rock cavern,” said the person quoted earlier. Salt cavern storage is expensive but allows high injection and withdrawal rates, as well as the ability to cycle working gas several times a year, he said. The first storage in India could come up at a site connected to a pipeline, the person said, adding that the reserve would store imported gas, which could be released when needed in the domestic market.