Priority allocation of gas to power plants may end
The government plans to end priority allocation of natural gas to power plants, which would be a major setback to the already-stressed sector that gets 37 per cent of the total domestic supply. It could be a blow particularly to top power producer NTPC, which has seven gas-fired plants. The move, proposed by the ministry of petroleum and natural gas, seeks dismantling the existing pricing system for domestic gas and replacing it with a market-based discovery mechanism on a gas exchange by pooling the local fuel with LNG, sources said. A senior government official said the oil ministry has floated a Cabinet note proposing the new price discovery mechanism and has removed power plants from the priority allocation list. The other two sectors — city gas distribution and fertiliser — are proposed to be kept on the list. “The power ministry has vehemently opposed the proposal, saying power is a regulated sector and needs domestic gas allocation more than any other sector,” said the official. Another official said the price increase is still manageable, as NTPC can pass on the costs to consumers, but taking away the basket of gas allocation from the power sector will be a greater setback. Priority allocation of gas to power plants may end NTPC has seven gas-based power plants with a capacity of over 4,000 MW, which require up to 7 mmscmd. The power sector gets 39 per cent of the total domestic gas distributed, and NTPC consumes a large part of it. An NTPC official said the move will be a major setback for the company. “It will be a bad move for the company and the power sector as a whole. Most of our gas comes from ONGC. The investments made in gas pipelines by GAIL to supply gas specifically to us will be affected,” the official said. Data available with the Central Electricity Authority (CEA) 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 per cent between April and September. While gas stations of central PSUs operated at around 30 per cent capacity, most of the private plants of companies like GMR Energy, SUGEN, Lanco Infra were shut. The private plants operated at an average 16 per cent plant load factor. ET had on October 24 reported that the government is planning a major gas pricing reform by permitting trading of all domestic supply on a local exchange to help discover market price for gas locally and render current gas price formula redundant.
HPCL continues to not recognise ONGC as its promoter
Oil Minister Dharmendra Pradhan’s assertion notwithstanding, oil refiner Hindustan Petroleum Corp Ltd (HPCL) continues not to recognise ONGC, its majority owner, as its promoter company. In a filing to stock exchanges on the company’s shareholding pattern as of the end of September, HPCL continues to list “President of India” as its promoter with “zero” per cent shareholding. Oil and Natural Gas Corp (ONGC), which earlier this year bought the government’s entire 51.11 per cent stake in HPCL for Rs 36,915 crore, is listed a “public shareholder”, owning “77.88 crores” shares or “51.11 per cent” shareholding of the company. Calls made to HPCL Chairman and Managing Director M K Surana for comments went answered. ONGC, which had to borrow Rs 24,876 crore for the acquisition that helped the government meet its disinvestment target for the 2017-18 fiscal, had made its displeasure clear about not being recognised as a promoter of HPCL. In a strongly worded letter to HPCL, it a couple of months back had warned of regulatory consequences of not recognising the majority shareholder as the promoter, sources privy to the development said. HPCL, however, has stuck to its gun and has refused to recognise ONGC as its promoter. When the issue first arose in August, Pradhan had clearly stated that ONGC is the new promoter of HPCL. ONGC, he had said, had invested in acquiring a majority stake in the company and so it is the promoter. “ONGC is the promoter of HPCL,” he had said. Pradhan’s comments followed Surana rejecting ONGC’s demand for being recognised as the promoter of the company. “Whatever we are doing, whatever we have done and whatever we will be doing will be as per our understanding of the statute and the guidelines and Companies Act and the SEBI guidelines… Beyond that who is interpreting whatever, it is his understanding of the situation. We need not subscribe to that,” he said. After ONGC bought out government stake, HPCL became its subsidiary. Since ONGC takeover in January, HPCL has made three stock exchange filings about the shareholding pattern of the company — the first on April 20, then on July 12 and finally on October 19. In all three, ONGC is shown as the public shareholder and President of India listed as the promoter. Sources said ONGC feels the HPCL management is bound to take corrective action to reflect the true picture. According to the Securities and Exchange Board of India’s rules, the entity that owns the controlling stake should be listed as promoter even if it was not the original promoter of the company. When Indian Oil Corporation (IOC) had bought the government’s stake in fuel retailer IBP Co Ltd, it was listed as the latter’s promoter in every instance after the deal. The same was the case when IOC acquired a majority stake in Chennai Petroleum Corp Ltd (CPCL). Surana has retained the title of Chairman and Managing Director despite corporate governance structure require a group having just one chairman and subsidiaries being run by managing directors and CEOs. ONGC’s overseas subsidiary, ONGC Videsh Ltd, is headed by a Managing Director and CEO. Its refinery subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), which is listed on BSE, too is led by a Managing Director and CEO. ONGC Chairman is the head of boards of both the companies. Since acquiring a majority stake in HPCL, ONGC has only been able to appoint one director to that firm’s board. ONGC has appointed its Director (Finance) Subhash Kumar to HPCL board. He has replaced Sushma Taishete Rath, Joint Secretary in the Ministry of Petroleum and Natural Gas. Prior to this, HPCL had two government nominee directors — Rath and Sandeep Poundrik, Joint Secretary (Refineries) of the Oil Ministry. After the appointment of Kumar, there remains only one government nominee director on HPCL board.
US agrees to grant India waiver from Iran sanctions
The US has broadly agreed to grant India a waiver from Iran sanctions after the Indian side decided to cut oil imports from Tehran by about a third in 2018-19, sources familiar with the matter said, adding that an official announcement could be made over the next few days. The US plans to re-impose oil-related sanctions on Iran on November 4 to choke the Islamic Republic’s biggest source of income and pressure it to renegotiate a new nuclear deal. Any country, or company, trading with Iran without US consent after sanctions kick off risks getting cut off from the American financial system. The US has insisted all along that it wanted every country to reduce oil imports from Iran to zero eventually, but was open to country-specific waivers that would allow limited imports by those pledging ‘significant’ cut. India and other key importing countries have been engaged for months with the US for a waiver. “India and the US have broadly agreed on waiver. India will cut import by about 35% from last year (2017-18), which is a significant cut,” a source said. India had imported about 22 million tonnes of crude oil from Iran in 2017-18 and initially planned to raise that to about 30 million tonnes in 2018-19. But, as a condition of waiver, Indian oil firms will reduce their imports to 14-15 million tonnes, the source said. This would mean 1.25 million tonnes a month up to March 2019, the same as companies ordered for October and November, the source said. State oil firms are yet to decide on how this quantum will be split between them. A waiver will come as a big relief to Indian Oil and MRPL, the two largest Iranian oil consumers. How companies will pay for Iranian oil is still being negotiated between India and Iran, sources said, adding that it’s likely that the two countries will stick to the existing mechanism under which 55% of payment is made in euro and 45% in rupee through UCO Bank. Under this, rupee is used for import of rice, drugs, and other products from India while the balance proceeds in rupee and euro sit idle in the Indian bank waiting for sanctions to go. The Indian side, while building its case for a waiver, assured the US that this payment mechanism ensures Iran can’t use oil money from India for any terror-related activity, a key American concern. During the negotiations, India also told the US that it would like to import more American oil if it came on competitive terms, sources said. India and Iran still have to figure out shipping and insurance details for a smooth trade. Currently, Iran provides its tankers as well as insurance for oil cargoes to India. The US sanctions have driven away Indian and international shippers and insurers from extending their services for Iranian oil imports. Refineries using Iranian oil have also faced insurance issues during renewals in recent months. Indian and the US officials have been negotiating for months on terms of waiver from sanctions. India prefers Iranian oil as it comes cheap and suits many refineries’ technical configuration.
Equinor seeks oil, gas, renewable investments in India -CEO
Norwegian energy firm Equinor is exploring investment opportunities in India, its chief executive told Reuters on Wednesday. “We are looking at India both from oil and gas, but also from the renewables. It’s a very early (stage), but we need to be on the ground,” Eldar Saetre said on the sidelines of a business conference. Separately, the company should also consider investing in the liquefied natural gas (LNG) projects, the CEO said. “We look for opportunities in LNG, but it’s not something we need to grow, need to develop … it’s a part of opportunities that we are exploring,” Saetre added.
Puma Energy seeks license for retail fuel sales in India
Global trader Trafigura has applied for a license for its downstream arm Puma Energy to start retail sales of gasoline and gasoil in India, an oil ministry spokesman and Trafigura said on Tuesday. Global oil majors including BP, Total and Saudi Aramco want to enter India’s fuel retail market, attracted by growing demand for gasoil and gasoline in the world’s fastest growing major economy. “A license has been applied for on behalf of Puma Energy, a downstream distribution company in which Trafigura is the largest shareholder, and that application is still pending,” Trafigura said in an email. Puma Energy, in which Trafigura has a 49.6 percent stake, operates in 49 countries. Last year it expanded into Pakistan by buying a stake in a fuel retail network. According to Indian rules, a company can get marketing rights for transport fuels if it has invested or proposes to invest 20 billion rupees ($272 million) in the country’s oil and gas sector over a 10 year period. Last year, a consortium led by Russia’s state-controlled Rosneft and including Trafigura and Russian fund UCP paid about $13 billion to buy 98.26 percent of India’s Essar Oil, now known as Nayara Energy Ltd. Nayara operates a 400,000 barrels per day oil refinery at Vadinar in western Gujarat state and controls 4,756 fuel stations in India. Trafigura, which has about a 24.5 percent stake in Nayara, applied for a fuel retail license for Puma Energy about two months ago, an oil ministry source said. The payment made by Trafigura for the Essar Oil stake cannot be considered an investment in India’s oil and gas sector, this source said. An Indian oil ministry spokesman said the government was examining Trafigura’s request for a retail sales license. “It is being examined and some information has been sought on their investment plans in the country’s oil and gas sector. Once they reply, it will be looked into,” the spokesman said.
Cairn India to invest $4 bn in Rajasthan’s Barmer oil block
Cairn Oil and Gas, a unit of Vedanta Ltd, will invest $4 billion in its flagship Barmer oil block in Rajasthan, Cairn said on Tuesday. The Delhi high court on Monday allowed a 10-year extension to the block on the condition that it pays a higher share of profit to the government. The extension results in an overall increase of oil and gas reserves of 400 billion barrels and a production of 125,000 barrels, said Sudhir Mathur, chief executive officer of Cairn India. “The extension also increases our reserves by 250 million barrels. That is quite a big booster to our overall reserve position,” said Mathur. “Cairn has driven up its share of India’s oil output by 3.5 times in the last nine years, significantly from the Rajasthan block and the extension is a great acknowledgement of our performance.” The extension also paves the way for further investments. “We are spending $4 billion, out of which we have already signed contracts worth $2.3 billion and the work has started in a big way. There are already 13 rigs operating in the Rajasthan block,” said the CEO. State-run Oil and Natural Gas Corp. (ONGC) is a 30% partner in the Barmer oil block. “The government of India, acting through the directorate general of hydrocarbons, ministry of petroleum and natural gas, has granted its approval for a 10-year extension of the PSC for the Rajasthan Block, RJ-ON-90/1,” Vedanta Ltd said in an exchange filing on Monday. The 25-year contract for exploration and production of oil and gas from Barmer block RJ-ON-90/1 was due for renewal on 14 May 2020. In April 2017, the government had approved a new policy for extension of PSCs, which would provide for a contract extension only if companies operating the fields agree to increase the state’s share of profit by 10%. However, Vedanta felt that the May 1995 PSC for the block provided for an automatic 10-year extension on same commercial terms if there are hydrocarbons left to be produced. Vedanta thus challenged the April 2017 policy and the matter is sub judice. “The applicability of the pre-NELP Extension Policy to the Rajasthan Block PSC is currently sub judice,” Vedanta said in the filing. Its partner ONGC was also of the opinion that PSC provides for an extension on same terms. “Let the legal process take its own course. Whatever the verdict of the court, we will accept that,” Anil Agarwal, chairman of Vedanta Resources, had said earlier this month.
Petronas supplies first LNG cargo to marine-fuel vessel ahead of IMO 2020
Malaysia’s state energy firm Petronas said on Thursday it has supplied its first liquefied natural gas (LNG) cargo to a marine-fuel vessel ahead of a new mandate for ships to switch to cleaner fuels in 2020. Its subsidiary, Petronas LNG, loaded the first such LNG cargo onto the world’s largest LNG bunker vessel Kairos at the Regasification Terminal Pengerang (RGTP) located in southeastern Johor, the company said in a statement. “We believe that small-scale LNG opportunities will increase from the utilization of alternative cleaner fuel such as LNG,” Petronas LNG Chief Executive Officer Ezhar Yazid Jaafar said. “The new regulation of 0.5 percent global sulphur cap to be imposed by the International Maritime Organisation (IMO) in January 2020 will make LNG the alternative fuel of choice for the shipping industry.” Kairos has a capacity of 7,500 cubic metres, and it stopped in Malaysia to refuel while making its way from South Korea’s Hyundai Mipo Dockyard in Ulsan to Europe, Petronas said.
Next-wave LNG race hits hurdles in US-China trade war
The delay of a US Gulf Coast liquefied natural gas (LNG) export project has crystallized fears that the US trade battle with China is hampering efforts to line up buyers needed to move ahead with multi-billion-dollar builds. The United States is positioning itself as the dominant provider of the supercooled fuel as Asian nations shift away from dirtier power sources like coal, and this month’s approval of a giant Canadian project led by Royal Dutch Shell bolstered enthusiasm for the sector overall in North America. That optimism took a hit on Monday, when Australia’s LNG Ltd delayed until next year a planned decision on whether to build its Louisiana-based Magnolia LNG plant due to problems lining up Chinese customers. And it comes when bankers and analysts in the sector had already questioned whether the next wave of projects in the pipeline would pass muster with investors. “Chinese LNG demand growth is the largest piece of demand growth out there, and Chinese buyers have got to feel reluctant to commit to US capacity when the US government sees trade as a means of exerting political leverage,” said Bob Ineson, managing director of North American natural gas at IHS Markit. China set a 10 per cent tariff on US LNG imports last month, extending a trade scuffle in which US President Donald Trump imposed tariffs on $250 billion worth of imported Chinese goods and China retaliated with duties on $110 billion worth of US goods. China’s LNG demand has skyrocketed in recent years on Beijing’s pollution crackdown, with imports nearly tripling since 2015. Last year it overtook South Korea as the world’s No. 2 importer of LNG. That boom, along with rising demand from other Asian nations, has helped gobble up an anticipated LNG glut and boosted spot prices to near four-year highs, breaking a multi-year freeze on new project investment. By the mid-2020s, global LNG demand is forecast to range from 360 million to 450 million tonnes, up from about 290 million tonnes in 2017. With China leading that growth, signing deals with its companies is viewed as imperative to get larger projects done. But the tariffs are having a chilling effect, according to two US industry sources. China is not signing any long-term deals with US projects until the spat is resolved, they said. That’s not good news when there are at least six other new builds or expansions in North America on the cusp of a construction decision, with a handful more eyeing go-aheads by 2020, representing more than $100 billion worth of potential construction. The first wave of US LNG projects was able to leverage underutilized infrastructure and cheap gas to get a foothold in what had been a closely held global market. But second-wave newcomers like Tellurian Inc, NextDecade Corp and Venture Global LNG face a range of challenges from financing to contract pricing to pipeline access, experts told Reuters. With so many horses in the race, big builds backed by established players or expansions of existing export facilities will likely fare better than upstarts. This favors energy giants like Shell, Exxon Mobil Corp and Qatar Petroleum, all of which have projects in the works, along with Cheniere Energy, the leading independent US LNG company. Shell and its partners this month approved the C$40 billion ($31 billion) LNG Canada mega project, promising 14 million tonnes per annum of new capacity before 2025, with the option to double that output. “My instinct would tell me that the larger companies have the resources and relationships to get these things approved, because they’re just enormous projects,” said Charlie Cone, an LNG analyst with energy data firm Genscape. LNG Canada’s chief executive, Andy Calitz, said last week that US rivals could end up “dead in the water” as long as China keeps its tariff on US imports. That could be a boon for Canada’s tiny Woodfibre LNG on the west coast and Pieridae Energy Ltd’s Goldboro LNG on the east coast. Non-Chinese buyers are also cautious about long-term deals due to changing trade policy, said IHS’s Ineson. “This conflict could lead to many developers of US-based projects missing this window,” he said.
Shapoorji Pallonji, Royal Vopak to set up LPG terminal in Gujarat
The Shapoorji Pallonji Group has tied up with Dutch firm Royal Vopak to build a Rs. 14 billion import terminal and storage facility for liquified petroleum gas (LPG) and oil products near Junagadh, in Gujarat, said two executives aware of the development. SP Ports Pvt Ltd, a part of Shapoorji Pallonji Group, and Vopak India BV, a subsidiary of Royal Vopak, plan to jointly execute the project at Chhara-Sarkhadi near Junagadh through their joint venture West Coast Liquid Terminal Pvt. Ltd (WCLTPL), the people mentioned above said on condition of anonymity. The terminal and storage facility will be housed at a port in Chhara-Sarkhadi being built by Simar Port Pvt. Ltd, a Shapoorji Pallonji Group company. “The terminal is being planned considering the increasing demand for LPG in India. The initial capacity of the terminal could be up to 5 million tons per annum (mtpa) with an expandable capacity of 10 mtpa,” said one of the executives cited above. LPG demand in India has risen after the introduction of the Pradhan Mantri Ujjwala Yojana (PMUY). India added 11.53 million new domestic LPG customers between April and June 2018, according to the petroleum planning and analysis cell, the data arm of the ministry of petroleum and natural gas. The terminal will import LPG, petroleum products, oil products and vegetable oil, and will have a storage and distribution terminal along with a jetty within the port, according to project details submitted to the Gujarat government. The project will require about 98 acres. The maximum throughput envisaged is 10 million metric tons per annum. Royal Vopak is the world’s leading independent tank storage company. Liquid propane, butane and LPG will be imported by using very large gas carriers and later heated, blended and dosed with odorant to make LPG for distribution via trucks and pipelines. Petroleum, oil and lubricants will be imported by using ocean moving petroleum oil tankers and distributed through trucks. Vegetable oil will be imported through ocean moving vegetable oil tankers and distributed by using trucks. Refrigerated propane and butane will be received through ships and will be first stored in refrigerated, full containment double walled storage tanks separately. They will then be heated, pumped to mounded tanks and stored separately. Pressurised propane and butane will be transferred to static mixer for blending and making the mixed LPG. Pressurised propane, butane and mixed LPG will be dispatched from terminal through road tankers and through pipelines. POL and vegetable oils will be received in the terminal through ships. WCLTPL has identified Chhara Port as its depth is suitable for large vessels. The port also has sufficient land to develop the proposed LPG and liquid terminal. A dedicated jetty will be developed for unloading propane, butane, LPG and liquid products. The optimum size of vessels operating at the proposed jetty would be 1,00,000 dead weight tonnage. The Shapoorji Pallonji Group said, “The group continuously explores various opportunities for its businesses. On the details sought, we do not wish to respond to market speculations and have no comments to offer.”
BPCL to invest $800m in Mozambique LNG project
Indian oil and gas firm Bharat Petroleum (BPCL) is reportedly set to invest $800m as equity in the Mozambique Rovuma Offshore Area 1 liquefied natural gas (LNG) project. The investment represents BPCL’s largest investment in an upstream project overseas, thehindubusinessline.com reported. The company holds a 10% interest in the Rovuma Offshore Area 1 concession, which is located within the Rovuma Basin. BPCL acquired the 10% stake for $703m. Anadarko Petroleum is the field operator with an ownership of 26.5%. Other participants in the project include Mitsui E&P Mozambique Area 1 (20%), Empresa Nacional de Hidrocarbonetos (ENH) (15%), ONGC Videsh (OVL) (10%), BEAS Rovuma Energy Mozambique (BREML) (10%), and PTTEP Mozambique Area 1 (PTTEP MZA1). The partners expect to make a final investment decision (FID) during the first half of next year. “We are hoping that the FID will happen sometime next year in the first half or second half.” Approximately 75 trillion cubic feet of natural gas has already been discovered in the project area, which comprises the Prosperidade and Golfinho/Atum complexes, as well as onshore LNG infrastructure in the Cabo Delgado province in northern Mozambique. The consortium partners are developing an initial onshore LNG project comprising two LNG trains with an aggregate nameplate capacity of 12.88 million tons per annum (Mtpa). An unnamed BPCL executive told the publication: “Assuming that the project cost is going to be somewhere around $20bn, we are anticipating that 33%-37% will be equity and the balance would be debt. “Once that is finalised, we are good to reach the FID stage. We are hoping that the FID will happen sometime next year in the first half or second half.” To make the FID, the partners need to achieve certain milestones, including signing long-term LNG sale and purchase agreements (SPA) for at least 9Mtpa. Earlier this month, Japan’s Tohoku Electric reached an agreement to purchase up to 0.28Mtpa of LNG from the project. Construction of the project is anticipated to begin by the end of next year, while the first LNG is expected by 2023.