Indian Oil Corp second quarter net profit down 12.5 per cent at Rs 3,326 crore
Indian Oil Corporation (IOC), the nation’s largest fuel retailer, today posted a 12.5 per cent dip in net profit for the quarter ended September at Rs 3,326 crore. The company had posted a net profit of Rs 3,805 crore in the same quarter last financial year. Total income of the company, however, rose 38 per cent to Rs 155,687 crore during the September 2018 quarter from 112,887 crore posted in the corresponding quarter last fiscal. IOC said its average Gross Refining Margin (GRM) during the six months ended September 2018 stood at $8.45 per barrel as compared to GRM of $6.08 per barrel in the same period last fiscal.
Gas allocation mechanism for power generation units in the works
In a big relief to private power companies, the government is working out a gas allocation mechanism for electricity generating units by pooling ONGC deep sea gas with LNG and subsidising the tariffs to revive about 25,000 mw projects. India has currently nearly 25,000 mw of operational gas-based capacity, all of which is stressed because of gas unavailability. The scheme, being discussed at the level of cabinet secretary-led high-level empowered committee, is proposed to be operated for next two financial years. The committee to address stress in the power sector due to fuel unavailability and regulatory issues is slated to meet on November 6. “The proposal entails price pooling of 5.45 mmscmd of ONGC deep water gas, currently with GAIL, with imported LNG and supplying it to power plants. There are two options of allocation being mulled at this stage, which could be auction of the gas or allocation by rotation to the power projects,” a senior government official said. Calculated at a cost of the present RLNG price of $9 per mmBtu, electricity tariff at the pooled price might drop to around Rs 5.90 per unit, industry experts said. “If the government subsidises electricity tariffs by Rs 1.50-2 per unit to make it affordable, the subsidy outgo would be over Rs 15,000 crore,” an expert said on condition of anonymity. ET on Wednesday reported that the oil ministry has floated a cabinet note proposing new price discovery mechanism and has removed power plants from the priority list for allocation of APM gas. Association of Power Producers director-general Ashok Kumar Khurana said pooling of gas is a positive step. “This will help stressed gas-based assets to operate and meet peak demand. With improvement in gas availability, these assets can form an important component of ancillary services,” he said. The government had launched an e-RLNG scheme in March 2015 for two years. The scheme was discontinued after two rounds of bidding after the power ministry received aggressive bids from companies. Against total requirement of 117 mmscmd, total gas supply in 2017 was 30 mmscmd. Data available with the Central Electricity Authority showed the 24,812-mw gas based power stations in the country generated higher than the target in September and in the financial year so far. The projects operated at a capacity of 23.3% between April and September. Power companies have been asking the government to restart the scheme as about 7,500-mw capacity is completely stranded while the rest is stressed.
France’s Engie rebuilds global LNG trade team in Singapore post-divestment
French energy group Engie said it is in the process of building a new liquefied natural gas (LNG) team after it completed the sale of its LNG assets to Total in July * The global LNG trading team will be headed by Gordon Water in Singapore to service both internal and external clients, Engie said in a statement * The team will help “manage the company strategic repositioning towards a leaner LNG business”, it added * Engie is close to completing a two-year plan to sell off some 15 billion euros ($17.09 billion) of non-core assets and re-invest those proceeds away from coal and into areas such as renewable energy, power grids and energy services
Bursting natural gas storage chokes off North Asian LNG demand
Rising gas storage levels in North Asia are denting demand for liquefied natural gas (LNG) ahead of a warmer than expected winter, driving at least one utility in Japan to resell winter cargoes it does not need, regional trade sources told Reuters. Storage levels in Japan and South Korea are estimated to be at their highest since at least 2015, according to data from Refinitiv Eikon. Gas tanks are brimming in China as well, according to trade sources. North Asia’s gas inventory typically peaks in October before it starts getting drawn down, but this year there are no signs yet of stocks falling, according to the data. “Due to warmer weather than usual, Japanese buyers’ demands are low and tank inventories are high,” a trader familiar with the Japanese LNG market said on Friday. At least one utility is trying to sell winter cargoes that it does not need due to high inventory, he added. Japan is likely to experience warmer-than-average weather between November and January, the country’s official forecaster said last week, implying low demand for heating. Nuclear power plant restarts at the world’s top LNG importer are also denting demand for the super-chilled fuel. Electricity generation using solar power has been growing in some parts of Japan, which is eating into LNG demand, a second source familiar with the Japanese market said. Chinese buyers are also expected to slow down spot purchases due to full storage capacity, a source familiar with the Chinese gas market said. “I think we are quite balanced and don’t have too much requirement at this stage,” the source added. TANKERS LNG is still being stored in vessels off Singapore and Malaysia waters for up to three weeks, unable to find buyers, in an unusual and expensive move. At least half a dozen LNG tankers have been floating LNG off Singapore and Malaysian waters, according to Refinitiv Eikon shiptracking data. Traders are betting that demand will increase when it starts getting colder. “Prices are very low. If they sell and demand starts to appear, the prices will rise again and it will be a big loss,” a Singapore-based trader said, adding that the companies are likely waiting for winter demand to set in.
ONGC to draw perspective plan to integrate business
State-owned Oil and Natural Gas Corporation (ONGC) will draw a new perspective plan to integrate recent acquisition Hindustan Petroleum Corporation Ltd (HPCL) and just commissioned petrochemical unit with its mainstay oil and gas exploration and production operations, its Chairman and MD Shashi Shanker said. The nation’s largest oil and natural gas producer is keen that its recent diversification into refining business as also petrochemicals is leveraged to full by integrating them with its core business. “Post-acquisition of HPCL and commissioning of OPaL petrochemical plant at Dahej (in Gujarat), the company is drawing up a perspective plan to achieve proper synergies from the integration to maximize value, optimize cost and enhance efficiency,” Shanker said. Synergies like the use of naphtha and other liquid hydrocarbons ONGC produces in the petrochemical unit set up by ONGC Petro-additions Ltd to produce value-added products as well as integrating refining stream of HPCL with company’s existing subsidiary, Mangalore Refinery and Petrochemicals Ltd can result in huge opportunities, he said. “ONGC today is chasing the hydrocarbon molecule to the last mile to derive the best value from it at the minimal cost,” he said, adding the company wants to put in place a well-knit strategic plan to bolster its presence in the entire hydrocarbon value chain. ONGC earlier this year bought government’s entire 51.11 per cent stake in HPCL for Rs 36,915 crore, adding 23.8 million tonnes of annual oil refining capacity to its portfolio that made it the third-largest refiner in the country after Indian Oil Corp (IOC) and Reliance Industries Ltd. ONGC already is the majority owner of Mangalore Refinery and Petrochemicals Ltd, which has a 15-million tonnes refinery. The idea is to prepare a strategy to strengthen the integration further so that business growth is well diversified and risk well distributed to tide over the volatility due to fluctuations in global crude oil prices, he said. The company has already mapped the production profile from its deepwater project in the KG Basin. Block KG-DWN-98/2 will help double ONGC’s gas production by 2022. The current gas production stands at 23 billion cubic meters, which is expected to reach nearly 42 BCM by 2022. Oil production is also set to increase from the present level of 22 million tonnes to 25.6 million tonnes by 2022. Also, the acquisition of Gujarat State Petroleum’s Deen Dayal West (DDW) block in KG basin has given ONGC ready infrastructure and facilities to produce from its high-pressure, high-temperature (HP-HT) fields. This will also help in early monetization of other fields in the vicinity, which are a part of HP-HT Corridor, Shanker said. “Rig has already been deployed in DDW field for drilling and hydro-fracturing in order to boost production from this field”. ONGC Group recorded a net profit of Rs 22,106 crore on a turnover of Rs 204,019 crore in 2017-18 fiscal year. The business strategy being finalised would also focus on opening up of new basins to replenish reserves and increase its production, he said. The company already operates in six out of seven discovered basins in the country. The oil production is also planned to be ramped up with various ongoing projects worth Rs 77,000 crore out of which Rs 10,000 crore is being invested towards redevelopment and enhanced oil recovery projects only.
China’s state-run Zhenhua buys first LNG cargo from Chevron
China’s state-run Zhenhua Oil purchased its first liquefied natural gas (LNG) cargo from Chevron Corp to supply a South China-receiving terminal that it won access to in a recent auction, according to Zhenhua officials on Thursday. The 100-million-cubic-metre cargo was purchased at about $0.30 per million British thermal unit discount to Japan Korea Marker (JKM) quotes on a delivered basis, the officials added. The cargo, discharged at CNOOC’s Yuedong terminal in Shenzhen, was sourced from the Australian Gorgon project operated by Chevron. Zhenhua and its local partner Longkou agreed in September to pay $26.5 million for the access to use the CNOOC facility, in the first such auction as the world’s second-largest LNG buyer pushes to open up its LNG import business dominated by top three state oil majors.
Shell profits soar to four-year high
Royal Dutch Shell third quarter profits soared to their highest in four years, boosted by rising crude prices as the company pushed ahead with one of the world’s largest share buyback programmes. The world’s second-largest listed oil and gas company saw its cash generation from operations rise by nearly 60 per cent to $12.1 billion, as deep cost savings in recent years filtered through. “Good operational delivery across all Shell businesses produced one of our strongest-ever quarters,” Chief Executive Ben van Beurden said in a statement. Net income attributable to shareholders in the quarter, based on a current cost of supplies (CCS) and excluding identified items rose 39 per cent to $5.624 billion from a year ago. That compared with a company-provided analysts’ consensus of $5.766 billion. It was $4.691 billion in the second quarter. The profits benefited from stronger oil and gas prices as well as bigger contributions from trading operations but was offset by weaker refining margins, tax and currency exchange effects. Shell launched a $25 billion share buyback programme in July, making good on a promise to boost shareholder returns following the 2016 acquisition of BG Group, in a show of confidence in its future cash generation and profit growth outlook. Shell said it completed the first tranche of buybacks in October for $2 billion and was launching a second tranche on Thursday of up to $2.5 billion by January 28. Shell’s shares came under pressure in recent months after three disappointing quarterly results that raised concerns over its ability to meet the $25 billion share buyback target on top of $15 annual dividend payout, the world’s biggest. Debt levels remained stubbornly high. Shell’s debt ratio versus company capitalisation, known as gearing, declined to 23.1 per cent in the quarter from 23.6 per cent at the end of June. Oil and gas production in the quarter declined 2 per cent from a year earlier to 3.596 million barrels of oil equivalent.
China’s gas demand to rise to 580-670 bcm by 2030: Official
China’s gas demand will more than double by 2030 with the industrial sector the largest user at 26-30 per cent of total consumption by that time, a Chinese official said on Wednesday. Liu Xiaoli, a professor at China’s Energy Research Institute, said total gas demand would grow by 7.7 to 8.6 per cent a year between 2015 and 2030, reaching 580 to 670 billion cubic metres (bcm) in 12 years’ time. Liu is the Deputy Director of the Centre for Energy Economics and Development Strategy at the institute which is part of China’s National Development and Reform Commission of China, the government central planning agency. China recently decided to reduce air pollution, prompting a government-mandated switch to cleaner gas from coal for heating in parts of the country — part of a so-called “Blue Sky” initiative. This has led to a spike in its gas consumption and imports of liquefied natural gas (LNG). Liu told delegates at an LNG conference in London 80 cities would be covered by the next phase of the “Blue Sky” initiative from 29 cities last year, covering a third of China’s population and 40 per cent of its gross domestic production. While the industrial sector will be the biggest consumer of gas in China by 2030, with a rise to 175 bcm from 72.7 bcm in 2017, the power sector will be the biggest growth driver, she said. “The power sector will be the biggest contributor to incremental gas demand and newly incremental gas demand will be around 110 bcm for the outlook period,” she said. Installed gas-fired power capacity will jump 44 per cent between 2017 and 2020 to 110 gigawatts (GW) from 76.3 GW and will more than triple to 250 GW by 2030. Liu said China would no longer expand coal-fired power generation after 2020, with thermal power generated by new gas-fired plants. The breakdown of Chinese statistics and forecasts such as these from Liu is eagerly watched by the industry as such data from China are rare, delegates at the conference said. China’s scale is such that relatively fringe developments in the global gas industry are magnified — Chinese LNG and compressed natural gas (CNG) fuelled vehicles, for example, consumed 17.6 bcm of gas last year — more than the entire gas consumption of Belgium or all of France’s LNG imports. Nevertheless, such huge increases in gas consumption would not automatically translate to an equal boon for the LNG market. Liu underscored China’s focus on developing its domestic gas reserves — she said 44 per cent of its proven reserves were as yet undeveloped, with some 3.9 trillion cubic metres of gas remaining economically recoverable with current technologies. Domestic gas production will increase to between 170 bcm to 200 bcm by 2020 from 148 bcm in 2017 and to 260 to 310 bcm by 2030, she said.
BP on track to take FID on West African Tortue LNG project by year-end: CFO Gilvary
BP and its partner Kosmos Energy are on track to take the final investment decision for the West African Tortue LNG project by the end of 2018, BP CFO Brian Gilvary said Tuesday. The project — based on an estimated 15 Tcf (425 Bcm) of gas in an area straddling the Mauritania/Senegal maritime border — is expected to produce its first gas in 2022. New FIDs in the global LNG supply industry have been few and far between in recent years due to relatively low LNG prices and the slew of new projects starting up, but more investment decisions are expected as the LNG market looks likely to tighten from around 2021. “The project entered the FEED [phase] in April 2018, and we are still targeting FID at the end of 2018 and first gas in 2022,” Gilvary said during a conference call with analysts after the release of the company’s third-quarter results. In February, BP and US-based Kosmos moved a step closer to FID on Tortue LNG after the governments of Mauritania and Senegal signed an intergovernmental deal on the development. Gilvary said that in the first phase, Tortue LNG would have a capacity of 2.5 million mt/year before moving to peak production of 10 million mt/year. LNG FIDS Tortue LNG would add to the existing LNG export facilities in West Africa that include the six-train Nigeria LNG, Angola LNG and Equatorial Guinea LNG. A new floating LNG plant off Equatorial Guinea — the Ophir Energy-operated Fortuna LNG project — has, however, stalled with time running out for the UK-based operator to reach FID before the company’s license expires at the end of the year. But more FIDs are expected globally after Shell and its partners earlier this month took FID on the two-train, 14 million mt/year LNG Canada project. FIDs in 2019 could include the addition of four new mega LNG trains in Qatar, the Novatek-operated Arctic LNG 2 in Russia, the Anadarko-operated Mozambique LNG project and a handful of plants in the US. Shell’s head of integrated gas Maarten Wetselaar said last month that the global LNG market would tighten from late 2021 after a possible “soft” period from next summer. In its latest LNG outlook published in February, Shell said the world risked an LNG supply crunch by the mid-2020s due to the collapse in LNG-sector investment since the 2014 oil-price slump.
Enough supply of petroleum for countries to cut oil import from Iran: Donald Trump
President Donald Trump said on Wednesday in a presidential memorandum that he had determined there was sufficient supply of petroleum and petroleum products for countries to “significantly” reduce their purchase of crude oil from Iran, which is going to face US sanctions from November 5. In May, Trump pulled the US out of the 2015 landmark nuclear deal, the Joint Comprehensive Plan of Action (JCPOA) terming it as “disastrous”. Under the Obama-era deal, involving five permanent members of the United Nations Security Council and Germany, Iran agreed to stop its nuclear programme in exchange of relief from economic sanctions. Moments after coming out the deal, Trump signed fresh set of sanctions against Iran and warned countries against any cooperation with Tehran on its controversial nuclear weapons programme. In his presidential determination, Trump said “there is a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran by or through foreign financial institutions.” Trump’s presidential determination, not an executive order but a kind of directive issued by the White House to the members of his adminstration on some policy matters, comes less than 100 hours before the deadline set by him for countries like India to bring its purchase of oil to zero from Iran by November 4. India has expressed its difficulties in doing so given the galloping energy needs of its 1.3 billion people. More than 80 per cent of India’s energy needs are imported. But at the same time, India has taken steps to reduce its oil purchase from Iran, which has already declined substantially. Recently, senior US officials were in India for talks in this regard. However, US officials are tightlipped on the issue. The White House also did not immediately respond to question if India’s oil purchase reductions from Iran would be considered significant. Trump said he will continue to monitor the situation. Secretary of State Mike Pompeo on Wednesday said, on the Laura Ingraham Show, that on November 5, the US will put back in place sanctions that will be very severe on the leadership of Iran. He hoped that this will convince them to change their ways. Pompeo, on the another show, said that Iran was the world’s largest state sponsor of terror. “They were squandering the people’s money, the Iranian people’s money, on these silly malign activities. And our effort is to get them to change that behaviour”. State Department Deputy Spokesperson Robert Paladino told reporters that on November 5, at 12:01, sanctions that were lifted under the Iran nuclear deal will come back into full effect. “The sanctions that are reimposed on November 5th will target critical sectors of Iran’s economy, such as energy, shipping and the ship-building sectors, as well as the provision of insurance and transactions involving the Central Bank of Iran and designated Iranian financial institutions,” Paladino said. The Iranian regime is the world’s leading state sponsor of terror, and these sanctions are meant to cut off revenues that the Iranian regime uses to conduct terrorism and fund terrorist groups around the world, and that includes Lebanese Hizbollah, Hamas, Kata’ib Hizballah and the Taliban, he added. “These groups foment global instability, they use these funds to support their nuclear and ballistic missile programs, and these funds are used to line corrupt Iranian leaders’ pockets rather than help the Iranian people, who are the longest-suffering victims,” Paladino said. Meanwhile, in its report dated October 29, the independent CRS said India reduced its imports of Iranian oil substantially after 2011, lowering purchases to six per cent of its oil imports by 2013, from over 16 per cent in 2008, in the process incurring significant costs to retrofit refineries that were handling Iranian crude. “However, since sanctions were eased, India’s oil imports from Iran increased to as much as 800,000 bpd in July 2018—well above 2011 levels. Indian firms ended or slowed work on investments in Iranian oil and gas fields during 2012-2016, but reportedly resumed work after sanctions were lifted,” it said. After international sanctions were lifted, India reportedly also paid Iran the USD6.5 billion it owed for oil purchased during 2012-2016. “The degree to which Indian firms and the government of India will cooperate with reimposed US sanctions is not certain. Indian leaders assert that Iran did not violate the JCPOA and sanctions should not be reimposed on it,” the Congressional Research Service (CRS) report said. In June 2018, India and Iran agreed to use the rupee in order to maintain economic engagement. Nonetheless, major Indian refiners Reliance Ltd. and Indian Oil Corporation Limited – citing a decision by the State Bank of India to cease transactions with Iran as complicating efforts to stay engaged with Iran – have announced they are considering cutting oil buys from Iran. “India’s purchases of Iranian oil fell sharply from July to August 2018, and press reports say that the country might try to cut Iranian oil imports dramatically in November 2018, when US energy sanctions go back into effect,” the CRS report said.