OPEC is in ‘catholic marriage’ with India; here’s why secy-general Mohammad Barkindo thinks so
The Organization of the Petroleum Exporting Countries (OPEC) is in “catholic marriage” with India, said secretary-general Mohammad Barkindo as the country is one of the biggest consumers of crude oil and there is a vested interest in its economic growth and prosperity. On dealing with continuously rising demand for crude oil, Barkindo told CNBC-TV18 that India and OPEC and non-OPEC members “are in the same boat”, with the former accounting for a bulk of the total demand and the latter being the biggest producer. Presently, India imports roughly 80% of its total crude oil consumption and is third largest oil consumer in the world. He said that to meet the current and future demand for crude oil, investments worth $11 trillion will be required. “…Producing countries in OPEC and non-OPEC declaration of cooperation are in catholic marriage with India. We are in this boat together and we have to put the issue of investment on the front banner,” Barkindo, who was here for the India Energy Forum told the news channel. The OPEC secy-general said that the demand will continue to grow by 14.5 million barrels a day until 2040 and that oil and gas will continue to dominate the energy basket. “With rising demand, the available spare capacity is thining out. We have figure out how to bring back investment,” Barkindo added. OPEC’s interview followed a crucial meeting held by Prime Minister Narendra Modi with Saudi Arabia Oil Minister Khalid A Al-Falih, oil companies and other key stakeholders on Monday, which also witnessed worries over little investment in oil and gas exploration sector. Modi asked why there were no new investments in oil and gas exploration despite the government facilitating a conducive environment. In the meeting, India also asked Saudi Arabia to consider alternative payments method to ease the pressure on the rupee. Oil prices have surged in last one year, with frequent fluctuations, due to several factors such as the conscious decision by oil-producing countries to tighten supply, Venezuelan economic crisis, and most recently, the US sanction on Iran.
Britain’s Cuadrilla starts fracking for gas after seven-year pause
British shale gas company Cuadrilla has started fracking for natural gas in northwest England, seven years after the practice was halted in Britain for causing earth tremors. Environmental groups strongly oppose the practice of hydraulic fracturing, or fracking, which involves extracting gas from rocks by breaking them up with water and chemicals at high pressure. But the government, keen to cut Britain’s reliance on imports as North Sea gas supplies dry up, has tightened regulations and has given Cuadrilla permission to frack two wells at its Preston New Road site in Lancashire. Cuadrilla, 47.4 percent owned by Australia’s AJ Lucas and 45.2 percent owned by a fund managed by Riverstone, said it would spend at least three months fracking two horizontal wells to test flow rates to determine whether full-scale gas extraction would be viable. The British Geological Survey estimates shale gas resources in northern England alone could amount to 1,300 trillion cubic feet (tcf) of gas, 10 percent of which could meet the Britain’s demand for almost 40 years. “Shale gas has the potential to be a new domestic energy source, enhancing our energy security and delivering economic benefits, including the creation of well-paid, quality jobs,” the Department for Business, Energy and Industrial Strategy said. “We have been clear that any shale developments must be safe and environmentally sound,” the department added in a statement. Attempts to extract the gas have come under fire from local communities and campaigners concerned about the potential effect on the environment and ground water. They say extracting more fossil fuel is at odds with Britain’s commitment to reduce greenhouse gas emissions. “It is morally bankrupt to be heralding the start of a whole new fossil fuel industry,” Craig Bennett, chief executive of environmental group Friends of the Earth said in a statement. “You can deal with climate change or you can have fracking – you can’t do both,” he said. The government asked its climate advisers on Monday to examine whether Britain should toughen its climate targets and set a date to move to a net zero emissions goal. Britain has an existing target to cut its greenhouse gas emissions by 80 percent compared with 1990 levels by 2050.
LPG penetration in Northeast to cross 80 per cent by March 2019
The LPG cylinder penetration in the Northeast region is likely to touch 80 per cent by the end of 2018-19, much ahead of its initial plan to reach this target by 2030. The rigorous push to achieve the target ahead of its time was received during implementation of the Pradhan Mantri Ujjwala Yojana (PMUY) in the region from last year, state level coordinator for Assam (Petroleum Products) Uttiya Bhattacharyya told PTI here. “We hope to touch the figure of 80 per cent in the LPG penetration in Northeast by the end of 2018-19 fiscal. Initially, we had planned to reach this figure in NE by 2030,” he added. Bhattacharyya, who is also the Indian Oil Corporation Chief General Manager (IndianOil-AOD), informed that the penetration level in the region has gone up to over 76 percent at present from around 44 percent in 2015-16. “So, we are already much ahead of our planned target. However, we are still much below than the national average, which stands at 88.5 percent compared to 62.2 percent in 2015-16,” he added. Bhattacharyya said earlier the oil marketing companies, comprising IOCL, HPCL and BPCL, together used to release around six lakh LPG connections annually, transforming an average of about 1,700 per day. “Now, this number has shot up to 5,830 cylinders every day. It is an unthinkable jump that the industry has achieved. It was possible due to an effort in implementing the ‘Gram Swaraj Abhiyan’ under the PMUY,” he added. Under the ‘Gram Swaraj Abhiyan’, which was launched on April 14 this year in the region, LPG connections are being distributed in 6,942 villages. The public sector undertaking Indian Oil Corporation currently has 10 LPG bottling plants across the Northeast region and these are functioning at over 100 percent utilization. The company is investing over Rs 286 crore to enhance its LPG bottling capacity, including setting up of two greenfield plants at Agartala in Tripura and Barapani in Meghalaya, by 2020. IOC is pumping Rs 143.46 crore to set up the plant at Agartala by June 2019 that will have an installed bottling capacity of 60,000 metric tonne per annum (MTPA). The Barapani unit, which is at an initial stage now, will have a capacity of 30,000 MTPA and will cost Rs 74 crore. Apart from the two units, the company is adding capacities to its existing bottling facilities at Silchar, Bongaigaon and North Guwahati. The expanded Silchar unit has been commissioned just recently after increasing the capacity to 1,20,000 MTPA from 60,000 MTPA at a cost of Rs 23.45 crore. In North Guwahati, the company is spending Rs 45.13 crore for raising the output to 1,80,000 MTPA from 1,20,000 MTPA, besides having two mounted storage vessels of 600 MT each. The expansion work at the Bongaigaon unit has been completed and the capacity is now doubled to 60,000 MTPA.
Minister of Petroleum & Natural Gas to launch the Road Show for Phase II of Indian Strategic Petroleum Reserves on 17th Oct’2018
Minister of Petroleum & Natural Gas and Skill Development and Entrepreneurship Shri Dharmendra Pradhan will launch the Road Show for Phase II of Indian Strategic Petroleum Reserves on 17th Oct’2018, in New Delhi. In line with the integrated energy policy of Government of India, Union Cabinet accorded “in principle” approval for Phase-II SPR program which involves creation of additional 6.5 MMT of storage in underground rock caverns and associated facilities at Chandikhol, Odisha (4.0 MMT) and Padur-II, Karnataka (2.5 MMT). In order to explore feasibility of commercialisation of the Phase I SPR at Padur (2.5 MMT) and the proposed Phase II SPRs at Chandikhol, Odisha (4.0 MMT) and Padur II, Karnataka (2.5 MMT), it is planned to solicit investment partners and pursue the initiatives of Phase II SPRs through PPP mode of implementation for construction, filling, and operation respectively and also filling and operation of the existing Phase I SPR at Padur. To elicit interest and seek feedback from prospective investors, it is planned to conduct roadshows. Based on the evinced interests, a suitable model for on-boarding of investors/PPP partners will be prepared for an international competitive bidding for wider participation. The roadshow will outline the Phase I and Phase II SPR programs along with technical details, plausible financial models and the implementation modalities.
Total in talks with multiple Indian firms for stake in LNG terminals, city gas projects: CEO
French energy giant Total SA on Tuesday said it is in discussions with multiple Indian companies to acquire a stake in LNG import terminals and city gas distribution projects and is also interested in setting up petrol pumps in the world’s fastest-growing energy consuming nation. Total Chairman and CEO Patrick Pouyanne said the French company is “very interested” in investing in downstream sectors in India. “We are in discussion with many players (for a stake in liquefied natural gas import terminals),” he told reporters here. Refusing to give details, he said Total was interested in selling LNG into India as well as retailing to consumers. It wants to do that through partnership with local companies. on Sunday reported that Total is in talks to buy up to half of Adani Group’s stake in LNG projects in Gujarat and Odisha, a under-construction LPG import facility and in the firm’s city gas projects. “City gas is interesting business” that can use the imported LNG, he said. Pouyanne said Total was also interested in fuel retailing in the country but hasn’t yet qualified for a license for that. “We need to have license for that (petrol, diesel retailing). We need to get a license, so we are working on that,” he said. A license to set up petrol pumps in India is contingent upon a company investing Rs 2,000 crore in oil and gas infrastructure like refineries, pipelines, import terminals and oil and gas fields. He said, Total’s investment in a LPG import terminal in Andhra Pradesh doesn’t qualify it for a retailing license. Sources said the French firm is keen on investing in the fast growing gas market in India and finds Adani a suitable vehicle as it owns the crucial downstream infrastructure. Adani holds 25 per cent stake in just-completed 5 million tonnes a year liquefied natural gas (LNG) import terminal at Mundra. It is also building a similar capacity LNG import terminal at Dhamra in Odisha at a cost of Rs 5,100 crore. Sources said Total is in talks to buy half of Adani’s stake in the two terminals. It is also looking at buying a 50 per cent stake in under-construction LPG import terminal that Adani is building at Mundra in Gujarat as well as a stake in Adani’s flourishing city gas distribution projects, they said adding a preliminary pact may be signed this week during the visit of Total CEO Patrick Pouyanne to India. India is looking at more than doubling the share of natural gas in its energy basket to 15 per cent in next few years and is giving major push to city gas distribution projects. It imports half of its gas needs, which are projected to rise exponentially as it shifts from polluting liquid fuels to environment friendly natural gas. While the Mundra LNG terminal has Gujarat State Petroleum Corp (GSPC) as the lead partner, Adani is building a new LPG import facility at the same port with a total capacity to 3.56 million tonnes per annum. The LPG terminal is to be completed by next month. Adani Gas, a subsidiary of Adani Enterprises Ltd, is developing city gas distribution (CGD) networks to supply the piped natural gas (PNG) to the industrial, commercial, domestic (residential) and Compressed Natural Gas (CNG) to the transport sector. It already has set up city gas distribution networks in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh. It in the recently concluded CGD bid round won rights to 13 cities on its own and another 9 in joint venture with state-owned Indian Oil Corp (IOC). These are in addition to the 50:50 Adani-IOC joint venture winning rights to develop CGD network in Allahabad, Chandigarh, Ernakulam, Panipat, Daman, Dharwad, and Udhamsingh Nagar in previous bid rounds. Sources said Total is looking at buying half of Adani’s stake all the CGD networks. The development comes weeks after Total announced its exit from Royal Dutch Shell-operated Hazira LNG terminal in Gujarat. It sold its 26 per cent stake in the project to Shell.
India’s oil demand to rise by 5.8 million barrels per day by 2040: OPEC
India’s oil demand is expected to rise by 5.8 million barrels per day (bpd) by 2040, accounting for about 40 per cent of the overall increase in global demand during the period, OPEC’s secretary general said on Tuesday. “India is projected to see the largest additional oil demand (3.7 per cent per annum) and the fastest growth in the period to 2040,” said Mohammed Sanusi Barkindo, secretary general of the Organization of the Petroleum Exporting Countries. He added that the global oil sector needed $11 trillion in investment to meet future demand by 2040. Global oil demand is expected to increase by 14.5 million bpd from 2017 to 111.7 million bpd in 2040, OPEC said in its latest report, issued in September. Retail fuel prices in India, the world’s third biggest oil consumer and importer, recently touched record levels due to high oil prices and a weakening rupee, leading to protests across the country. Barkindo said consumers including India have expressed concerns on the outlook for supply. “Our view is that the market is currently adequately supplied and well balanced. For 2019, there is the potential for an imbalance, due to larger growth in supply,” he said. Barkindo’s views echoed those of Patrick Pouyanne, chief executive of French oil and gas group Total, who said on Tuesday that he expected demand for crude to be lower and supply to be higher in 2019.
BP says price controls “not good”, days after India cuts cost of fuel
Global oil major BP said on Monday fuel price controls are “not good”, days after India asked state-run fuel retailers to shield customers from record-high costs by cutting margins. BP has a tie-up with Reliance Industries, owner of the world’s biggest refining complex, to enter India’s downstream sector including retail fuel sales. “Price controls will not be good for the fuel sector,” Dudley said at the IHS CERA conference. He declined to say when BP would open its first fuel retail outlet in India in partnership with Reliance. India cut taxes on diesel and gasoline this month and asked state companies, which account for the bulk of retail fuel sales in the country, to reduce marketing margins after a public backlash against record-high pump prices. The move was widely seen as government intervention in local fuel pricing, although Finance Minister Arun Jaitley and Oil Minister Dharmendra Pradhan had said the step should not be seen as going back to a regulated regime. The government has since said it would not interfere with market-determined prices of gasoline and diesel. BP, which has tied up with Reliance to explore gas fields in India, expects to have a 10 percent gas market share by 2022, Dudley said, adding that he expects BP India’s gas production with Reliance to be 1 billion cubic feet in five years. Dudley said slow decision-making had in the past curbed its investment in the country and was not good for “brand India”.
India hopes to finalise partners for strategic oil reserves within a year
India hopes to forge partnerships with private players to build out its strategic petroleum reserves within the coming year, the head of Indian Strategic Petroleum Reserves Ltd (ISPRL) said on Monday. India’s government approved two strategic petroleum reserve (SPR) sites with a total capacity of 6.5 million tonnes in June. H. Ahuja, the chief executive of ISPRL, said on Monday that ISPRL, a government-owned a special purpose vehicle, planned to get bids from investors for the second phase of the storage plan in six to nine months. Ahuja was speaking on sidelines of the India Energy Forum by CERAWEEK.
Why China may soon regret its tariffs on US natural gas
Beijing’s tariffs on U.S. liquefied natural gas threaten to raise prices for buyers throughout Asia and deal a self-inflicted wound to China’s state-owned energy companies. The import tax on American LNG essentially removes U.S. suppliers from consideration at trading desks across China’s growing LNG market. There are plenty of supplies elsewhere in the world, but in closing the door to U.S. LNG, China is throwing a wrench into the market and giving sellers an opportunity to hike prices. In the year through June, China was the second biggest buyer of U.S. LNG, according to energy research firm Wood Mackenzie. China is trying to shift from coal to cleaner-burning natural gas as the government aims to reduce air pollution. But the country’s domestic gas production and pipeline imports are not growing fast enough to meet demand, so China is turning to LNG, a form of natural gas super-chilled to liquid form and transported by sea in massive tankers. Despite its dependence on LNG, Beijing nevertheless imposed a 10 percent tariff on U.S. supplies last month, retaliating after the Trump administration slapped a 10 percent import tax on $200 billion of Chinese goods. The world’s two largest economies play an influential role in the on-demand market for LNG — China as a buyer and the United States as a seller. Their trade dispute promises to redirect LNG trade routes and reverberate throughout the market. It also comes ahead of winter, when demand is highest and LNG customers are vulnerable to price spikes. “The market has been balanced to tight this year,” said Bob Ineson, IHS Markit executive director for global LNG. “You’re probably going to be in a fairly strong pricing environment through the winter.” Chinese buyers have already moved to limit the impact by purchasing most of the LNG they’ll need to meet demand this winter, according to Wood Mackenzie. The firm estimates that China will need to buy about 8 million tons of LNG on the spot market, where commodities are purchased for immediate delivery or shipment in the near future. “The impact will depend on how short the market runs this winter and the extent to which China needs to buy additional LNG, which will partly be determined by weather,” said Giles Farrer, research director for global gas and LNG supply at Wood Mackenzie. U.S. companies like Cheniere Energy pump a lot of LNG into the spot market, providing a chunk of flexible supplies for buyers who want to swap cargoes to take advantage of price differences and shorter delivery times. Analysts say Chinese buyers will try to swap cargoes as much as possible to avoid the tariffs on U.S. LNG. If they can’t find other cargoes, they’ll be stuck paying the 10 percent duty. But China may have to pay a premium in any case, said Farrer. Since China artificially raised prices on U.S. LNG by 10 percent, suppliers in Australia, Qatar and Southeast Asia can get away with charging Chinese buyers just below the cost of LNG from the United States, including the tariff. That markup would tack another $4 million to $5 million on LNG cargoes for Chinese buyers, according to Wood Mackenzie. Those costs would be absorbed by the state-owned companies like CNOOC, PetroChina and Sinopec, which dominate the country’s LNG purchases. On the opposite end, American suppliers like Cheniere and traders like Trafigura and Vitol would stand to benefit. The situation provides an incentive for European LNG buyers to resell U.S. cargoes to Chinese energy companies, said Katie Bays, head of energy and industrials at Height Capital Markets. The resales, already an emerging trend this year, allow European utilities to capitalize on high LNG prices in Asia. They also allow China to avoid tariffs because once LNG is loaded into European storage tanks, it is no longer considered American gas, Bays said. Asian LNG prices need to trade about $3 per million British thermal units above European prices for the reloadings to make economic sense, according to Wood Mackenzie. The gap between the prices has narrowed, but the firm anticipates those conditions will return this winter. According to Bays, the United States would make more money in every one of those scenarios. “If you add inefficiencies to the market, the result of that — and the only result of that — is that prices will have to go up to compensate the market and create a new, efficient solution,” said Bays. “If you’re a seller, that’s a great place to be. If you’re a trader that’s a great place to be,” she said. “But if you’re a buyer, it’s a tough spot.”
Railways awaits regulatory nod for LNG trial run
After a successful experimental run with CNG, Indian Railways has set its eyes on LNG as an alternative fuel option. The transporter is awaiting regulatory approvals for conducting trials. LNG requires less storage space than CNG which makes it a more efficient and convenient option. By storing LNG in the same space as CNG, trains can run for three times the distance, according to experts. The CNG experiment was conducted on 21 trains. LNG is already being tried out in other countries, including Russia, North America and Spain. The CNG experiment Of the trains running on CNG, 20 are in the Northern Railways and one in Vijayawada region (South Central Railway). A decision on scaling up CNG train-run experiment depends on whether more refuelling stations can be set up. Theoretically, use of CNG resulted in 8-11 per cent savings against a similar train running on diesel. However, in CNG-based trains, the Railways has fitted cascades, a group of cylinders, with storage space for CNG that takes away the space equivalent to a third of a full coach. Replacing the energy storages with seats, would have resulted in extra revenue for the Railways.Now, it wants to try out LNG as alternative fuel and estimate the savings it can make. LNG scores over CNG in several areas including space required for storage which means a train can run for a longer distance with the same amount of LNG. “In the space allocated for CNG storage in trains, Railways can store LNG, which will generate three times the energy. In simple terms, same amount of LNG stored in the space meant for CNG can haul a train for a much longer distance without requiring refuelling, and thus without having to stop,” Subodh Kumar Sagar, Chief Mechanical Engineer, Indian Railways Organisation for Alternate Fuels (IROAF), said in a conference recently. Regulatory nods Railways needs a regulatory mechanism to install the storage in trains, and in terminals, from Lucknow-based Research Designs and Standards Organisation (RDSO) and Nagpur-based Petroleum Explosive Safety Organisation. The Railways now requires a network of LNG fuelling points to ensure refuelling capacity. Trial run For the trials, the Railways mulls attaching an LNG tanker to a train which can be refuelled at end of the journey. The cost-benefit analysis is yet to be finalised. Based on early estimates, a railway official explained, “Installing an LNG tanker will require 30 per cent higher capital expenditure than CNG, while the running cost of LNG will be cheaper by 40 per cent.” The biggest expenditure will be on the refuelling infrastructure, which will have to be decided at a national level. The refuelling infrastructure requires points for storage, retail, decantation, and filling the tanks. “Railways had increased its adoption of biodiesel in fiscal 2015-16 and 2016-17 which dropped in 2017-18. This dip can be attributed to GST implementation which impacted biodiesel makers. Biodiesel became more expensive than diesel,” shared an official. Another alternative energy that Railways has started adopting is solar, both at stations and on trains.. Flexi-solar panels for trains, developed by a public sector unit Central Electronics Limited, are able to generate enough power to meet light and fan requirements of coaches.