AG&P investing heavily in India’s gas infra
Philippine global engineering firm AG&P (Atlantic, Gulf and Pacific Co. of Manila) has secured rights to put up facilities in India to make natural gas available to residents and businesses in two areas of the southern state of Tamil Nadu. The grant to AG&P—along with 22 other entities—was part of New Delhi’s ninth bidding round for city gas distribution projects (CGD) that covers 63 geographical areas across India, including seven areas in Tamil Nadu. The Petroleum & Natural Gas Regulatory Board awarded to the homegrown multinational’s unit AG&P LNG Marketing Pte. Ltd. rights to build LNG facilities in the districts of Kanchipuram and Ramanathapuram in Tamil Nadu. Karthik Sathyamoorthy, president of AG&P LNG Marketing, said in a statement this added to AG&P’s portfolio in India. AG&P is also building an LNG terminal in Karaikal, in the union territory of Puducherry. He said AG&P was investing heavily in gas infrastructure to support India’s drive to switch to natural gas as a clean and affordable source of fuel. In Tamil Nadu, AG&P’s CGD networks will deliver natural gas “directly, safely and conveniently” to houses, gas stations, industrial and commercial establishments.” CGD concessions are intended to make natural gas available for use as compressed gas for use as automotive fuel as well as piped gas for households, commercial establishments and industrial businesses. “This landmark CGD project for these two districts [of Tamil Nadu] and others across the region will reduce energy costs, create jobs, trigger economic and social development, and lead to much needed cleaner air, improving the quality of life for the people of Tamil Nadu,” the company president said. So far, India has awarded CGD rights covering 178 districts across the country that together represent about 46 percent of the population and 35 percent of its land area.
Yamal LNG ships one-hundredth cargo
Yamal LNG, a joint venture-owned integrated Liquefied Natural Gas (LNG) project in northern Russia, today announced has offloaded its one-hundredth cargo of LNG, less than a year since the project’s first shipment in December 2017. “The hundredth cargo was loaded onto the Arc7 ice-class LNG carrier “Fedor Litke”, making the Project’s cumulative to-date delivery 7.4 million tons,” PAO Novatek, that owns 50 per cent stake in the project, said in a statement. It added Yamal LNG is constructing a 17.4 million tonne per annum (mtpa) natural gas liquefaction plant comprised three LNG trains of 5.5 mtpa each and one LNG train of 900 thousand tons per annum, utilizing the hydrocarbon resources of the South-Tambeyskoye field in the Russian Arctic. The first LNG train began production in fourth quarter of 2017 and trains 2 and 3 began in July and November 2018, respectively. Apart from PAO Novatek, Yamal LNG shareholders include Total, which holds 20 per cent, CNPC holding 20 per cent and the Silk Road Fund holding 9.9 per cent stake.
Qatar to withdraw from OPEC as of January 2019, says minister
Qatar is withdrawing from the Organization of the Petroleum Exporting Countries (OPEC) as of January 2019, Saad al-Kaabi, the country’s energy minister said on Monday. The decision to withdraw from OPEC came after Qatar reviewed ways to enhance its role internationally and plan its long-term strategy, al-Kaabi told a news conference.
NDA government earned Rs 11000 billion oil tax revenue in last 4.5 years
Claiming that the NDA government earned oil tax revenue of Rs 11,000 billion in the last four and a half years, the leader of the Congress in the Lok SabhaMallikarjun Kharge Friday alleged that the money had not been used for development and sought to know where it had gone. “They are getting (revenue) from crude oil, diesel and petrol…they got Rs 11,000 billion in these four and half years. They have collected that much of money. Where is that money?,” he asked. Speaking to reporters here, he alleged that the NDA only helped “big corporate friends” with the money. “Have they given it to farmers to empower them? Have they helped the irrigation projects? They did not do anything. Simply they are collecting, they are helping their big corporate friends… companies. That’s why the NPA is growing day by day,” Kharge said. The NDA government is taking money from Reserve Bank of India to give to corporates, he alleged. Almost half of the fuel price is made up of taxes. The Centre levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel.
Fuel price: Soon, tanking up in Delhi to be cheaper than in UP
Petrol and diesel will become cheaper in Delhi than UP in a few days, restoring an advantage the capital’s motorists lost on October 5 when UP chief minister Yogi Adityanath matched the Centre’s move to offer relief from high oil prices by reducing tax on fuel while his Delhi counterpart Arvind Kejriwal did not budge. The continuous decline in pump prices for the last one-and-a-half months has shrunk the difference between fuel prices in the two states by 67 per cent for petrol and over 42 per cent for diesel in the last 30 days alone. Ajay Bansal of All India Petroleum Dealers’ Association, an umbrella body of petrol pump operators, said the current trend of price reductions by state-run fuel retailing companies indicate price of petrol will fall by Rs 1.10 a litre and diesel by Rs 1.32 in the next six to seven days. This is good news for the capital’s petrol pump operators who had seen sales drop, especially at outlets in areas bordering UP, as motorists preferred to tank up in the neighbouring state where fuel had become cheaper by Rs 3 a litre after the October tax relief. The sharp price movement is because of the way the two states tax fuel. UP has a fixed rate, while Delhi has an ad-valorem system. In UP, the tax amount does not rise or fall when the retailers change the price. But since Delhi charges VAT as a certain per cent of the fuel price, VAT swings sharply with any price change. The ad valorem system amplifies the impact of any price change. So it is good when price goes down but pinches harder than in a fixed rate regime when rates head north. According to IndianOil, the country’s largest fuel retailer, petrol price has cumulatively declined by Rs 9.59 per litre and diesel by Rs 7.56 per litre in Delhi since October 17 as oil companies have passed on the benefit of sliding crude prices and stable rupee-dollar exchange rate.
Govt forms 6-member panel to look at selling 149 fields of ONGC, OIL to pvt firms
The government has constituted a six-member committee to look at selling as many as 149 small and marginal oil and gas fields of state-owned ONGC and OIL to private and foreign companies to boost domestic output, sources said. The panel is headed by NITI Aayog Vice Chairman Rajiv Kumar and includes Cabinet Secretary P K Sinha, Economic Affairs Secretary Subhash Chandra Garg, Oil Secretary M M Kutty, NITI Aayog CEO Amitabh Kant and ONGC Chairman and Managing Director Shashi Shanker. Sources said the committee is a follow up of the October 12 meeting called by Prime Minister Narendra Modi to review domestic production profile of oil and gas and the roadmap for cutting import dependence by 10 per cent by 2022. At the meeting, the Oil Ministry made a presentation showing that 149 smaller fields of Oil and Natural Gas Corp (ONGC), Oil India Ltd (OIL) and other explorers accounted for just 5 per cent of the domestic crude oil production. It was suggested at the meeting that these smaller fields could be given out to private and foreign firms and ONGC could concentrate on the big ones where it could rope in technology partners through production enhancement contracts (PEC) or technical service arrangements. Sources said the ministry was of the view that ONGC should concentrate on the large fields as they contribute to 95 per cent of its production and leave out the rest for private firms. On the anvil is some kind of extended version of the Discovered Small Field (DSF) bid round where discovered and producing fields of ONGC are auctioned to firms offering the maximum share of output to the government, sources said. The six-member panel has begun consultations with the stakeholders on the possible options, they said. This is the second attempt of by the Oil Ministry to take away some of the fields of state-owned ONGC for giving to private and foreign companies. In October last year, the Directorate General of Hydrocarbons (DGH) had identified 15 producing fields with collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic metres of gas of national oil companies for handing over to private firms in the hope they would improve upon the baseline estimate and their extraction. The plan, however, could not go through as ONGC strongly countered the DGH proposal with its own proposal that it be allowed to outsource operations on the same terms as the government plan. Sources said ONGC is of the view that it should be allowed the same terms that the government extends to private and foreign firms in DSF. The government gave out 34 fields to private firms by offering them pricing and marketing freedom for oil and gas they produced from the fields in the first round of DSF. The second round of DSF with 25 fields on offer is currently under bidding. The fields offered in DSF were taken away from ONGC and Oil India Ltd on the pretext that they were lying idle and unexploited. But under the present proposal, the government plans to take away discovered and producing fields. Sources said ONGC feels it too should be allowed to seek revenue sharing partnership for its fields. Field operations could be outsourced to foreign or private firms that offered the highest revenue or production share over and above a baseline production. The ministry is reasoning that the areas where the fields were discovered by ONGC were given to the state-owned firm on nomination basis. In the proposal that was mooted in October last year, the plan was to give out 60 per cent stake in 15 fields — 11 of ONGC and four of Oil India. These included Kalok, Ankleshwar, Gandhar and Santhal — the big four oil fields of ONGC in Gujarat. The DGH too had identified 44 fields of ONGC and OIL which could take on partners for production enhancement work where bidders would get the ‘tariff’ that they bid as a return for increasing the output ‘over the baseline production’ for an initial period of 10 years. The Oil Ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms would help raise output as they can bring in technology and capital, sources said. It has been tasked by the Prime Minister to cut dependence on oil imports by 10 per cent by 2022 from the over 77 per cent dependence in 2014-15. But the dependence has only increased and is now over 83 per cent. The privatisation is repeat of the infamous round in 1992-93 when medium-sized discovered fields like Panna/Mukta and Tapti oil and gas field in western offshore were given to the now defunct Enron Corp of the US and Reliance Industries Ltd (RIL). As many as 28 fields were then awarded. Under this regime, ONGC was made licensee and given an option to farm in 40 per cent of stake. The controversial privatisation under the then oil minister Satish Sharma had resulted in an inquiry by the Central Bureau of Investigation (CBI).
Oil firms chosen to expand Qatar’s north field gas reservoir to be named mid-2019: Minister
The oil companies that Qatar selects to expand its north field natural gas reservoir will be announced in mid-2019, the country’s energy minister Saad al-Kaabi said on Monday. Qatar plans to build four additional liquefied national gas trains in mid-2019, al-Kaabi said at a news conference. Qatar will announce the selected partners to build the largest ethane cracker in the world in the first quarter of 2019, he said.
Natural Gas Prices Fall Below Zero In Texas
Surging U.S. oil production in the Permian basin has helped crash oil prices. But the Permian is also home to skyrocketing natural gas production, and output is growing so fast that drillers are trying to give it away for free. When they can’t, they just burn it off into the atmosphere. Unlike in the Marcellus shale, where natural gas is the main target, drilling in the Permian is focused entirely on crude oil. Natural gas is a nice bonus that comes along with the oil. But the drilling frenzy in West Texas and New Mexico has resulted in a glut of this associated natural gas. There is a pipeline bottleneck for crude oil, but there is also a shortage of pipeline space for natural gas. The glut has become so bad that next-day prices for gas at the Waha hub in the Permian have plunged to a record low, falling to as low as 25 cents per MMBtu. In some instances, producers have actually sold some gas at negative prices. That means that a company is paying someone else to take the gas off of their hands. On Tuesday, the lowest price recorded was -25 cents/MMBtu (to be clear, that is negative 25 cents), according to Natural Gas Intelligence (NGI). It was the second consecutive day that prices were in negative territory. “That’s right, someone was paid to buy gas in the Permian on Monday,” RBN Energy LLC analyst Jason Ferguson said, referring to NGI’s pricing data. “While we’d like to tell you this was some sort of transient, one-off event that led to a day of dramatically low gas prices, that isn’t likely the truth of the matter. Ferguson went on to add that there is little prospect of a recovery until next year. “The Permian gas market is flooded with associated gas and won’t see significant new takeaway capacity until the start-up of Kinder Morgan’s Gulf Coast Express pipeline in late 2019,” Ferguson said, according to NGI. “The problem is here to stay, at least for a few months. Take a deep breath if you trade the Permian gas markets.” The negative prices are down sharply from the average price this year at $2.16/MMBtu at the Waha hub. The predicament also stands in sharp contrast to natural gas traded elsewhere. Nymex prices for December delivery are trading around $4.40/MMBtu, up sharply over the past month due to low inventories and cold weather. Ironically, the inauguration of new oil pipelines is making the gas glut worse. According to RBN, the startup of the expansion of the Sunrise oil pipeline, owned by Plains All American Pipeline LP, added takeaway capacity for oil. That has allowed for more drilling and completions, which has led to more produced gas. The supply glut has had other effects beyond low prices. Drillers often vent, flare or otherwise leak natural gas during their drilling operations, which has both environmental and fiscal consequences. A report from the Wilderness Society and Taxpayers for Common Sense, finds that between 2009 and 2015 drillers on public lands wasted 462 billion cubic feet (Bcf) of natural gas, or enough gas to meet the needs of 6.2 million households for a year. At an average price of $3.65/MMBtu over that time period, the wasted gas adds up to about $1.7 billion. The federal government under President Obama tried to force drillers to capture this wasted gas. In 2016, the Bureau of Land Management (BLM) finalized regulations on venting, flaring and leaks at oil and gas facilities on public lands. However, BLM under Trump has rolled back these standards, relying instead on a patchwork of uneven regulations at the state level. Some states do better than others on regulation. Colorado, for instance, “set the standard for reducing gas waste when it finalized first-in-the-nation methane capture requirements in 2014. The state has shown that there are easy and cost-effective ways to address methane pollution,” according to the report from the Wilderness Society and Taxpayers for Common Sense. At the other end of the spectrum is New Mexico. New Mexico has wasted more natural gas than any other state, about 570,000 tons annually, according to the report. The state wastes about $182 to $244 million worth of gas each year, or enough gas to satisfy the needs of every resident in New Mexico each year. It is no surprise that New Mexico has some of the weakest standards on methane emissions, a problem now that BLM is removing the federal standards and leaving regulation up to the states. Meanwhile, the problem is only getting worse with soaring production in the Permian. The rate of flaring in New Mexico climbed by 2,244 percent between 2009 and 2013. Negative prices for natural gas offers very little incentive for drillers to capture that methane.
Mumbai: Attractive valuation, gas push draw institutions to Mahanagar Gas
Since August, Mahanagar Gas has seen aggressive buying by all institutions – overseas investors, domestic mutual funds, and insurers – as the company is best placed to harness the growing demand for cleaner fuel such as CNG, PNG. Cost control on the back of falling gas prices and a smart recovery in the value of the rupee would also benefit the company, said analysts. The stock, which declined 26 per cent so far this year, is currently trading at 15 times FY 2019 earnings, compared to 27X for Indraprastha Gas and 17X for Petronet LNG. “MGL boasts of a strong financial profile – debt-free balance sheet, strong free cash flows and robust return ratios” said Jal Irani, analyst, Edelweiss Securities. “We expect EBITDA margins to continue to lead industry, leading to a sustainable 20 per cent RoE. The stock is trading at an attractive valuation of 15.6 times FY 2020 estimated earnings, a 19 per cent discount to IGL.” Foreign institutional investors raised their stake from 12.70 per cent to 19.03 per cent in the September quarter, while mutual funds’ stake increased from 5.34 per cent to 8.75 per cent. Insurance companies too have increased their holding from 1.68 per cent to 4.69 per cent during the September quarter. William Blair, Franklin Resources, Future Generali, Credit Suisse, Franklin Templeton, Shriram AMC, HSBC MF, and Union AMC, among others, have bought more shares of MGL in October. “The government’s priority allocation of domestic gas… has enabled MGL to access cheaper gas for CNG and domestic business segments, constituting 86 per cent of total sales volume,” said Mayur Matani, analyst, ICICI Securities. “MGL’s strong gas pipeline infrastructure and expanding operations in Mumbai, its adjoining areas and Raigad district will enable MGL to capture the benefits of the large and growing market.” Mumbai: Attractive valuation, gas push draw institutions to Mahanagar Gas MGL reported 29.7 per cent growth in revenue to Rs 762.9 crore, above analysts’ estimates, on account of higher volumes in the September quarter. Volumes increased 9.5 per cent YoY to 2.96 mmscmd, while analysts had pencilled in demand of 2.87 mmscmd. The company enjoys higher margins than peers due to efficiency and greater focus on CNG and PNG for households, analysts said. “Currently, CNG prices are at a 35-45 per cent discount to diesel and petrol. This should provide an adequate cushion and pricing power to MGL to maintain its EBITDA margins around Rs 8/scm over FY 2019-21,” said Nilesh Ghuge, analyst, HDFC Bank. “Favourable economics will also accelerate conversion of private vehicles, which will allow MGL to maintain its volume growth of 6 per cent over FY 2019-21”. Price increases during the September quarter countered the expected impact of high LNG prices and rupee depreciation on gross margins. Falling gas prices and the appreciating rupee this quarter will benefit the company, while MGL has taken the required price increases in the last quarter to adjust for the increase in gas costs, said analysts. “We like MGL’s business, given its dominance in the growing markets of Mumbai and its suburbs” said Avishek Datta, analyst, Prabhudas Lilladher.
Gail India proposes swap of Cove Point LNG cargoes in first quarter
Gail India is proposing to swap three liquefied natural gas (LNG) cargoes across the first quarter of next year, trade sources said on Friday. The Indian importer has 20-year deals to buy 5.8 million tonnes a year of U.S. LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site. With few LNG tankers available to ferry the fuel to India, Gail has already struck swap deals for a chunk of its Sabine Pass and Cove Point volumes. Under the proposed swap, Gail would sell its share of output from U.S. export plant Cove Point in return for taking delivery of LNG into India. Gail is offering a cargo a month from Cove Point for loading in the first quarter of next year in exchange for corresponding deliveries to India, one of the traders said. Participants must submit offers by December 3, the sources said.