OMV joins ADNOC for Ghasha gas project in Abu Dhabi
Austrian oil and gas group OMV signed a concession agreement with Abu Dhabi National Oil Company (ADNOC) for a 5 per cent stake in the Ghasha offshore gas and condensate fields, strengthening its position in the region, it said on Wednesday. The Ghasha project consists of the three major gas and condensate development projects – Hail, Ghasha and Dalma – as well as other offshore oil, gas and condensate fields, including Nasr, SARB and Mubarraz, OMV said.
Saudi’s Min Falih discusses joint refining projects with India’s Reliance
India’s Reliance, operator of the world’s biggest refining complex, and top oil exporter Saudi Arabia will explore joint investments in refining and petrochemicals in the two countries, Saudi Arabian Energy Minister Khalid al-Falih said. Al-Falih tweeted that he met Reliance Industries chairman Mukesh Ambani and they discussed joint investment opportunities and cooperation in petrochemicals, refining and telecoms in their two countries. Reliance’s two oil refineries in western India have a combined capacity to process 1.4 million barrels per day of crude and the company has set a target to raise capacity by a further 600,000 bpd.
Oil marketing companies want to procure compressed bio gas
IOCL has launched awareness programmes on sustainable alternative towards affordable transportation initiative. State-run oil marketing companies (OMCs), Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Limited recently organised a roadshow in Pune aware on public on SATAT (sustainable alternative towards affordable transportation) initiative launched by petroleum minister Dharmendra Pradhan. As part of SATAT initiative, OMCs are inviting expression of interest to procure compressed bio gas (CBG) from potential entrepreneurs and make it available in the market for use as automotive fuel. It envisions establishment of 5,000 CBG plants pan-India with an estimated production of 15 million tons per annum by 2023. The innovative SATAT initiative is a push to boost availability of more affordable transport fuels, better use of agricultural residue, cattle dung and municipal solid waste as well as to provide an additional revenue source to farmers.
South Korea’s 2018 LNG imports to hit record high over 42 mt
South Korea’s imports of liquefied natural gas (LNG) are set to reach an all-time high over 42 million tonnes in 2018 thanks to robust power generation demand, but next year’s shipments are likely to ebb on increased coal and nuclear power. South Korea, the world’s No.3 LNG importer after Japan and China, typically takes between 33 million and 37 million tonnes of LNG a year, mainly for heating, power generation and cooking. This year, a volume of 42.8 million tonnes of LNG is the expected intake, up 13.8 per cent from 37.6 million tonnes last year, according to ship-tracking data from Refinitiv Eikon. That would top 2013 LNG import levels of nearly 40 million tonnes, the country’s customs data showed. That was the year South Korea faced a series of nuclear reactor shutdowns due to a safety scandal over faulty parts, which led to an increase in gas power generation. “Gas usage for power generation sharply rose this year because the country’s nuclear utilization rate was the lowest so other power sources like gas had to fill the void,” said Shin Ji-yoon, an analyst at KTB Investment & Securities in Seoul. In the six months of the year, an average of almost half of the country’s 24 nuclear reactors were offline for planned maintenance, according to Reuters calculations based on data from state-run Korea Hydro & Nuclear Power Co. As of now, six reactors are shut down. South Korea’s nuclear utilization rates dropped to just 63.6 per cent for the first three quarters of 2018, the lowest rate ever, according to the Korea Hydro & Nuclear Power data. LNG VOLUMES EXPECTED TO BE LOWER IN 2019 Coal and nuclear together produce about 70 per cent of South Korea’s total electricity needs, although the country is trying to lower its dependence on those two fuels to shift its energy policy towards cleaner and safer energy in the long term. This year, gas power’s share of the country’s power supply mix outstripped nuclear-produced electricity over January-October, according to calculations on data from Korea Electric Power Corp (KEPCO). Gas-fired generation through October accounted for 26.7 per cent of electricity produced, up from 20.3 per cent last year, while nuclear made up 23.1 per cent, down from 27.6 per cent. Looking ahead, South Korea’s LNG demand growth for power generation is expected to hover around 1 per cent in 2019, down from nearly 20 per cent this year, robbed of room to grow as more coal and nuclear power plants are still coming online despite the plans for a long-term shift in policy, according to a report by state-funded think-tank Korea Energy Economic Institute. “We expect that (LNG) imports next year will be lower than this year but will still exceed 40 million tonnes,” said Nicholas Browne, director of Asia-Pacific gas and LNG at Wood Mackenzie.
Moderation in R-LNG prices will improve profitability for urea players: ICRA
With moderation in the R-LNG (Regasified-liquefied natural gas) prices, profitability for urea players will improve along with lowering of the working capital requirements, ratings agency ICRA has said. Natural gas is the key raw material for manufacturing urea and constitutes about 70 per cent of the total cost of production of the fertiliser. The fertiliser sector receives natural gas under the pool price mechanism wherein all the players receive gas at same cost which is the weighted average of the cost of gas consumed by the urea manufacturers. The pooled price for the fertiliser sector has risen substantially over the last 1 ½ years. Imported R-LNG prices has been on an uptrend driven by strong Chinese demand as the country partly replaced coal with natural gas as a key source of energy to combat pollution. “Spot LNG prices have already moderated by about 13 per cent towards the beginning of December 2018 from the recent peak of $11.5/mmbtu achieved in the beginning of November 2018,” said K Ravichandran, senior vice-president and group head, corporate ratings, ICRA. “The LNG prices are expected to moderate further to around $8.5-9/mmbtu by January 2019 with similar levels expected for entire Q4 FY2019. Given the outlook for the R-LNG prices, we expect pooled price to reduce to $10.5/mmbtu for Q4 FY2019 from current level of $ 11.8/mmbtu,” he said. The fall in natural gas prices would result in lower subsidy receivables thus reducing working capital borrowings. This would lower the interest outgo for urea manufacturers. “While energy savings would also decline with the fall in gas prices, the impact of the same is relatively smaller given the energy norms for several urea units have already been tightened in accordance with the New Urea Policy (NUP)-2015,” ICRA said.
CNOOC inks agreements with 9 firms for oil, gas exploration in South China
* CNOOC Ltd said on Tuesday it has signed strategic agreements with nine foreign companies to conduct exploration at two oil and gas blocks in southern China * The nine companies are: Chevron Corp, ConocoPhillips , Equinor, Husky Energy Inc, Kuwait Foreign Petroleum Exploration Co, Australia’s Roc Oil, Royal Dutch Shell, SK Innovation and Total * Exploration will take place in Block A and B in the Pearl River Mouth Basin offshore Guangdong province * Block A covers an area of 15,300 square metres (165,000 square feet) and is in water depths of 80 to 120 metres (262 to 394 feet) * Block B has an area of 48,700 square metres with water depth ranging from 500 metres to 3,000 metres
ONGC’s $1.7 billion deep sea award perks up oilfield services market
ONGC’s $1.7-billion work package, one of the biggest deep sea contracts offered in recent years, for its largest offshore block has perked up a listless global oilfield services industry and is likely to see fabrication of crucial underwater kits in the country for the first time. The state-run explorer has awarded the contract, its single-largest ever, to a consortium of BGHE (Baker Hughes, a GE company), McDermott International and LTHE (L&T Hydrocarbon Engineering for block KG-DWN-98/2 off the Andhra coast. The block has the potential to reduce India’s import dependence for oil and gas by 10 per cent. India currently imports 82 per cent of oil need and 45 per cent of gas requirement. Sources said under the local content clause of the contract awarded in October, BHGE and LTHE are expected to jointly fabricate ‘manifolds’ — structures laid on the seabed for channelising oil and gas from different wells into a single stream — locally, which will be a first for the country. McDermott will also use its engineering and other resources in Chennai besides Kuala Lumpur in Malaysia. “Built on a unique successful partnership model with McDermott and LTHE, the project will deliver leading technologies to ONGC across a full subsea scope,” Neil Saunders, head of of BHGE’s oilfield equipment unit, had said in a statement when the contract was awarded. Given the project’s size, complexity and importance of starting production on time, ONGC took the innovative step to combine the different work packages into a single integrated tender to eliminate interface issues and ensure closer monitoring of work flow. Interface issues among contractors have dogged several projects for which packages were tendered separately in the past, resulting in time or cost over-runs. ONGC expects to start producing gas by December 2019 and oil by March 2021. Total peak gas production rate is projected at 16 million cubic meters per day and peak oil output is pegged at 80,000 barrels a day. According to McDermott, the equipment and structures will be laid out at water depths ranging from 984 feet (300 metres) to 10,500 feet (3,200 metres) for connecting 34 wells in the block. This makes it technologically challenging projects in India’s east coast.
Oil prices fall for third straight session amid supply glut worries
Brent crude prices dropped more than $1 on Tuesday, falling for a third straight session, as reports of inventory builds and forecasts of record shale output in the United States, now the world’s biggest producer, stoked worries about oversupply. Concerns over future oil demand amid weakening global economic growth and doubts over the effectiveness of planned production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) also pressured prices, traders said. International benchmark Brent crude oil futures were at $58.62 per barrel at 0615 GMT, down 99 cents, or 1.66 percent, from their last close. Brent, which has slipped more than 4 percent in the past three sessions, fell to as low as $58.10 a barrel on Tuesday, down more than $1.50 from the previous day’s close. U.S. West Texas Intermediate (WTI) crude futures were down 91 cents or 1.82 percent at $48.97 per barrel. Both U.S. crude and Brent have shed more than 30 percent since early October due to swelling global inventories, with WTI now trading at levels not seen since October 2017. “Rising U.S. shale production levels along with a deceleration in global economic growth has threatened to offset OPEC+ efforts as markets weigh the potential of looser fundamentals,” said Benjamin Lu Jiaxuan, an analyst at Singapore-based brokerage firm Phillip Futures. “Market confidence remains extremely delicate amidst looming economic uncertainties as investors contemplate on weaker fuel demand beyond 2018,” he said. Oil production from seven major U.S. shale basins is expected to climb to more than 8 million barrels per day (bpd) by the end of the year for the first time, the U.S. Energy Information Administration said on Monday. Meanwhile, inventories at the U.S. storage hub of Cushing, Oklahoma, delivery point for the WTI futures contract, rose by more than 1 million barrels from Dec. 11 to 14, traders said, citing data from market intelligence firm Genscape on Monday. With oil prices falling, unprofitable shale producers will eventually stop operating and cut supply, although that will take some time, analysts said. The United States has surpassed Russia and Saudi Arabia as the world’s biggest oil producer, with overall crude production climbing to a record of 11.7 million bpd. Supply curbs agreed by OPEC and its Russia-led allies might not bring about the desired results, though, as U.S. output goes on increasing and Iran keeps pumping out more oil, analysts said. Some have also expressed doubts over Russia’s commitment to the cuts agreed with OPEC. Oil output from Russia has been at a record high of 11.42 million bpd so far in December. “If Russia can be a bystander, it benefits them greatly,” said Hue Frame, portfolio manager at Frame Funds in Sydney. “Although they will see a reduction in profitability, they will gain market share, which is generally more important in the oil market.”
Cabinet to take call on methanol policy in next 2 months, may allow import
In a major push to the clean energy mission, the Union Cabinet is likely to take up a comprehensive methanol policy within the next two months. The policy is likely to include proposals to import methanol and addresses subsidy-related issues such as the one involving the use of methanol as a cooking gas. This comes close to the heels of Assam Petrochemicals initiative to start supplying methanol cylinders to 500-odd families on November 5, using methanol cooking stoves. The fuel costs consumers Rs 600 a cylinder, compared to Rs 809.5 for non-subsidised cylinders in the market. NitiAayog has also come out with a master plan to introduce methanol as the preferred cooking fuel, reaching out to 50,000 households in Assam and 20,000 below-poverty-line families in eastern Uttar Pradesh. The Cabinet will also clear the setting up of four dimethyl ether (DME) plants in various parts of the country. DME can be a substitute for diesel and liquefied petroleum gas (LPG). “By 2022, we expect methanol demand in the country to be 10 million tons, once we start using it in sectors like transportation, cooking and waterways. To meet this initial demand, we are planning to import one million tons of methanol during the financial year 2019-20,” said V K Saraswat, member, NitiAayog. Though India has a capacity of 1.2 million tons, current capacity utilisation is only about 700,000 tons. Major methanol producers in India are Gujarat Narmada Valley Fertilizer and Chemicals (GNFC), Rashtriya Chemicals and Fertilizers (RCF), Assam Petrochemicals and National Fertilizers. India will be looking at countries like Iran, Saudi Arabia, Qatar and China for import of the fuel. The country also plans to tap is huge coal reserves to extract methanol, and is eyeing also stranded natural gas blocks as well. At present, India doesn’t have a commercial coal-to-methanol plant. However, state-run Coal India Ltd is working on such a project at Dankuni in West Bengal and a coal-to-gas project in Talcher, Odisha. The ministry of road transport and highways has now cleared methanol (M15 grade) as a fuel for transportation as well. China and Israel are among the major countries that have accepted methanol as a transportation fuel. According to NitiAayog, Indian Oil Corporation’s research wing is working on the right blend for using of methanol on vehicles in India. Based on current estimates, a 1,600-tonnes-per-day of methanol plant will require a capital expenditure of Rs 12 billion and would be able to produce methanol at Rs 17-19 per litre.
Can prices hit multi-year highs again?
Oil prices have crashed more than 30 percent since hitting a four-year high of almost $87 a barrel in early October. Worries over glut gripped the market and concerns over global economic growth made sentiment turn negative. The threat of supply shortage from Iran on account of renewed US sanctions after Trump’s rescinded the nuclear deal lifted the Asian benchmark Brent oil to multi-year highs. However, the recent decision from Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC allies lead by Russia has creased widespread anomalies in pricing. Despite pressure from the US to continue the present supply status quo, Saudi Arabia, the de facto leader of OPEC and other top oil producers have decided to cut the global oil output. The OPEC members will curb 0.8 million bpd output versus its October levels while the non-OPEC allies will reduce 0.4 million bpd. Anyhow, a combined cut of 1.2 million barrels per day against an earlier expectation of 1 million bpd will be reflected in the global markets by January. Though top producers like Iran, Libya, Venezuela, and Qatar are exempted from the supply cut deal, the decision is perhaps to support global prices. Saudi Arabia, the leading producer in the OPEC, is expected to cut output more than other peers in the grouping. Reportedly, the country would reduce its output to 10.2 million bpd in January, going far beyond a 2.5 percent reduction from its October levels. The Russia-led non-OPEC allies have also agreed to slash output. Russia is the world’s second largest oil producer, contributing about 10 percent of global production. Meanwhile, the threat of supply glut is still in the market. Iran, the third top producer of OPEC is now set to push exports by offering larger discounts to its buyers. The U.S imposed sanctions on Iran from November but unexpectedly allowed a broad exemption to major Asian oil consumers which permits them to continue import from Iran. Earlier, oil exports from Iran fell drastically, about 60-80 percent due to limited imports from key Asian buyers like China, India, Japan, and South Korea. Presently, export from the country is set to rebound using the waiver from US sanctions. China, the chief importer of Iranian oil started imports in December and Japanese and South Korean buyers are preparing to resume purchase from January. Indian refineries are also planning to buy larger quantities by January after a gap of six months. Simultaneously, concerns over demand from top Asian markets may weigh prices later. Asia’s largest economy, China has recently reported a slow growth rate. A decline in manufacturing numbers and a drop in car sales indicates that the trade conflict with the US is starting to add to the strain on the world’s largest economy. The Japanese economy fared poorly in the third quarter due to natural disasters and a decline in exports. A feeble Indian currency would result in higher cost for imports, which may hit demand for oil. Car sales in the country are also expected to register a decline this year. Looking ahead, a sudden recovery in prices is still on the cards but, the continuing deceleration of economic activity may curtail energy demand later. Shrinking demand growth and elevating U.S shale production pointed towards an emerging surplus which may also have an adverse impact on market sentiment. On the prices front, the global benchmark US WTI is likely to turn higher as long as the strong support of $48 a barrel is undisturbed. An unexpected drop below the same would open room for long liquidation pressure. Disclaimer: The author is Head of Commodity Research at Geojit Financial Services. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management.