Global LNG: Asian spot prices fall as November cargoes offloaded
Asian spot LNG prices fell this week as sellers struggled to offload the last of their November cargos and Chinese demand for December supplies failed to materialise significantly after a frenzy of Asian buying last month. November spot LNG fell 50 cents to $10.50 per million British thermal units (mmBtu) though trades were sparse and the bid-offer spread was wide. December prices were cited as low as $10.50 although a trade was heard at around $11.10. Crude [O/R], which was heading for a first weekly fall in over a month as part of a global market rout, also weighed on LNG as many contracts are linked to the oil index. Spot Asian LNG spiked last month in anticipation of winter demand after a hot summer depleted stockpiles. China was seen as providing support to prices after the country got caught short last winter with its storage capacity still low. However, that has not been the case so far this month. “China has been pacing down supplies, so as not to spike prices again,” said one LNG trader. “Storage is a fact but I guess they are replacing volumes a little wiser than last winter.” Another trader said a November cargo was bought by Osaka Gas for $10 per mmBtu although the Japanese utility had a wide delivery window and quality specification to make the sale attractive to suppliers. “There’s some distressed sellers out there; the bid offer spread is wide,” said one LNG trader. Turkey’s Botas closed a tender on Friday for 13 cargoes to be delivered in the first week of each month from November to February, according to several sources. WINTER START-UPS In the absence of a surge in demand, supplies were so far healthy going into the winter months, traders said. Japan’s Inpex said last week it had shipped its first condensate cargo from the mammoth Ichthys LNG project in Australia, which was seen as a prelude to LNG exports. Russia’s Yamal facility in the Arctic pumped a record 2.4 million tonnes of LNG in September and operator Novatek said its third train would begin operations in December, some 6 months ahead of schedule. Traders say Yamal’s restrictions lie more in the number of Arctic-class vessels available to ship the LNG than output. Two more Arc7 vessels, the Georgiy Brusilov and the Boris Davydov are now undergoing sea trials before joining Yamal, according to Refinitiv Eikon data. The start-up of a number of export projects in the United States will also add to supply, with some still expecting the first cargoes from Cheniere Energy’s Sabine Pass 5 and Corpus Christi 1 to hit the spot markets this year. Several traders mentioned the private tenders of multi-year strips from Corpus Christi 2, expected to begin operations next year, and Dominion Energy’s Cove Point. They said India’s Gail, which is committed to buying 5.8 million tonnes of LNG a year from the United States, was tendering Cove Point cargoes from 2021. Australia’s Woodside Petroleum and Indonesia’s Pertamina, both big LNG players, were also looking to sell Corpus Christi 2 cargoes. A three week planned outage at Cove Point is expected to end at the weekend.
EXPLAINER: Why India wants investors to fill its caves with crude oil
Amid the volatility in the global crude prices, the government is planning to increase its capacity of oil reserves and is seeking investments from oil traders and producers. Caves of oil: They are called strategic petroleum reserves (SPRs). India has three underground storage facilities (built at the cost of Rs 4,100 crore) that can store 5.33 million tonnes of crude oil. Oil in caves: The one in Visakhapatnam is filled with 1.33 MMT of oil purchased by the government, another in Mangalore (with 1.50 MMT capacity) has been half-filled by the government and another half leased to Abu Dhabi National Oil Co, and the third in Padur, Karnataka, is built but awaiting oil for storage. Dig some more: Cabinet early this year approved two more SPRs: a 4.4 million tonnes SPR at Chandikhol in Odisha and a 2.5 million tonnes facility at Padur in Karnataka. What now? Centre is seeking $1.5 billion in investments from global oil producers and traders to build the two additional reserves. It plans to hold roadshows in New Delhi, Singapore and London this month to draw investors. Getting private investors will lessen the financial burden on the government. Private or public? While the oil will be filled by private companies, India will reserve the first right over the crude. Government-owned Indian Strategic Petroleum Reserves Ltd (formed in 2006) will collaborate with private entities to invest in the project. Why? For India’s energy security (we import 85% of our crude needs), and to insulate us from external price and supply shocks. The oil in the three SPRs already built can help meet 10 days of crude requirement, and the two planned ones can hold supply of about 12 more days. What crisis? There was one during the Gulf War in 1990, when our oil reserves were adequate only for three days. Plus, others like US, Japan, China, UK and EU have it too.
Top US Envoy On Oil Import From Iran: India Will Talk To European Countries
After the US sanctions on Iran, there are many things about India coming out of oil import from Iran. Now it is revealed that India will take its decision after the talks with the US. Significantly, after China, India is Iran’s second largest oil importer. With regard to closure of imported crude oil from Iran completely close to the November 4 deadline fixed by the Trump Administration, one US diplomat on Iran affairs to discuss India in this regard, this week, New Delhi US Special Representative for Iran, Brian Hook, will travel to Europe besides India to discuss US foreign policy towards Iran. According to the Ministry of External Affairs, Hook will discuss with his “colleagues and partners” to fully rein in Iran’s destructive behavior in West Asia and its own neighborhood during his one-week long journey. Francis R., Assistant Secretary of State for Hook and Energy Resources, during the visit to India. Fanon will meet his counterparts for advice. At the same time, in Luxembourg, he will interact with officials gathered for the meeting of the European Union Ministers. According to the Ministry of External Affairs, the officials of the Hook and Energy Resource Bureau in France will meet the Executive Director of the International Energy Agency. In Belgium, he will meet his EU counterparts and discuss the continuation of the Iranian government’s missile program. Meanwhile, the Ministry of External Affairs says that he expects all associate countries to stop buying crude oil from Iran by November 4 or be ready for penal sanctions. India will continue to buy crude oil from Iran even after November 4, in response to a question on media reports in this regard, State Department spokesman Heather Knott said that this is not helpful. Knut said that in relation to all the restrictions that will take effect from November 4 and you are referring to the restrictions on Iran’s oil and the countries that continue to purchase crude oil from Iran, Have talked with your partners and colleagues all over the world. He said that our policies against those countries are very clear.
Oil prices rise amid Saudi tensions, but demand outlook drags
Crude oil futures rose sharply on Monday as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked worries about supply, although concerns about the long-term outlook for demand dragged on prices. Crude markets were also supported in the wake of data that showed South Korea did not import any oil from Iran in September for the first time in six years, before U.S. sanctions against the Middle East country take effect in November. Brent crude had risen 98 cents, or 1.22 percent, to 81.41 a barrel by 0124 GMT, on track for its biggest daily gain since Oct. 9. U.S. crude futures climbed 80 cents, or 1.12 percent, to $72.15 a barrel, extending gains they racked up on Friday after hefty losses on Wednesday and Thursday. “The market has again expressed concerns over geopolitical tensions in the Middle East after U.S. and Saudi traded comments over the disappearance of the Saudi journalist, leading to a jump in prices,” Wang Xiao, head of crude research with Guotai Junan Futures, wrote in a research note. Saudi Arabia has been under pressure since Jamal Khashoggi, a prominent critic of Riyadh and a U.S. resident, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul. The kingdom would retaliate against possible economic sanctions taken by other states over the case, its state news agency SPA reported on Sunday quoting an official source. Meanwhile, South Korea stopped importing Iranian oil for the first time in years. “South Korea’s move to stop Iran oil imports is giving the market confidence on prices,” said Chen Kai, head of research with futures brokerage Shengda Futures. Lingering geopolitical worries, trade concerns and a weaker economic outlook may pave the way for another week of volatile trading, Chen said, adding that Monday’s recovery in prices was “fragile”. Putting downward pressure on oil prices, the International Energy Agency, the West’s energy watchdog, said in its monthly report that the market looked “adequately supplied for now” and trimmed its forecasts for world oil demand growth this year and next. That comes after the secretary general of the Organization of the Petroleum Exporting Countries (OPEC) last week said the group sees the oil market as well supplied and that it was wary of creating a glut next year.
PM Narendra Modi to brainstorm oil scenario with global energy company CEOs
Prime Minister Narendra Modi will brainstorm with chief executives of top global and Indian oil and gas companies on Monday on emerging energy scenario, with ripples from US sanctions on Iran and volatile oil prices threatening growth. The third annual meeting would also deliberate on ways to revive investment in oil and gas exploration and production, official sources said. Modi’s first meeting was on January 5, 2016 where suggestions for reforming natural gas prices were made. More than a year later, the government allowed higher natural gas price for yet-to-be-produced fields in difficult areas like deep sea. In the last edition in October 2017, suggestions were made for giving out equity to foreign and private companies in producing oil and gas fields of state-owned ONGC and OIL. But the plan could not go through in view of strong opposition from Oil and Natural Gas Corp (ONGC). Sources said Saudi Oil Minister Khalid A Al Falih, BP CEO Bob Dudley, Total head Patrick Fouyane, Reliance Industries Chairman Mukesh Ambani and Vedanta chief Anil Agarwal are expected to attend the meeting Monday. The meeting, coordinated by the NITI Analog, is likely to focus on challenges posed by volatile oil prices and the US sanctions on Iran. The meeting would look at measures to attract investments and steps for making it easier to do business in India. Sources said reforms initiated in the last four years in the oil and gas sector, including open acreage policy, pricing reforms and liberalised licensing policy, will be showcased and suggestions would be sought on what more can be done to hasten growth. The government is looking at private investment to raise domestic oil and gas production, which has stagnated for the last few years while fuel demand has been rising by 5-6 per cent annually. India is dependent on imports to meet 83 per cent of its demand and more than half of its natural gas requirements. The Prime Minister in 2015 had set a target of reducing India’s oil dependence by 10 per cent to 67 per cent (based on import dependence of 77 per cent in 2014-15) by 2022. Import dependence has only increased since then and the government is now looking for ways to raise domestic output. Organization of the Petroleum Exporting Countries (OPEC) Secretary General Mohammed Barkindo and India’s Oil Minister Dharmendra Pradhan would also attend the meeting, they said. Also likely to attend the meeting are ONGC Chairman and Managing Director Shashi Shanker, Indian Oil Corporation (IOC) Chairman Sanjiv Singh, GAIL India head B C Tripathi, Hindustan Petroleum Corp Ltd (HPCL) Chairman Mukesh Kumar Suran, Oil India Chairman Utpal Bora and Bharat Petroleum Corp Ltd (BPCL) Chairman D Rajkumar.
Total in talks to buy stake in Adani’s LNG, city gas projects
French energy giant Total SA is in talks to buy up to half of Adani Group’s stake in LNG projects in Gujarat and Odisha, an under-construction LPG import facility and in its city gas projects, sources privy to the development said. The French firm is keen on investing in fast growing gas market in India and finds Adani a suitable vehicle as it owns the crucial downstream infrastructure, they said. 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, the sources said, adding that 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 an email sent to Total for comments remained unanswered, Adani Group spokesperson wasn’t immediately available for comments. 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) units 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 has, 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. Total had in March 2004 picked up 26 per cent stake in the 2.5 million tonnes a year Hazira liquefied natural gas import terminal in Gujarat. The terminal capacity was later doubled to 5 million tonne. Hazira LNG terminal was commissioned in 2005 and expanded to 5 million tonnes in 2013. Shell held the remaining 74 per cent stake in the company. Total has signed an agreement to sell 0.5 million tonne LNG per year to Shell over five years, on a delivery basis to supply the Indian and neighbouring markets. The deliveries will be sourced from Total’s global LNG portfolio and are expected to begin in 2019.
H-Energy will commission first LNG retail outlet in Maharashtra by October 2019: Darshan Hiranandani
H-Energy, the oil and gas arm of Mumbai-based Hiranandani Group, is planning to commission its first LNG retail outlet in Panvel, Maharashtra in a year. The outlet, part of a larger expansion plan, will help the company sell gas from its Jaigarh LNG terminal located in Ratnagiri district in the state. “H-Energy will have its first LNG retail outlet in Panvel by October next year. We are trying for four more (outlets) but the Panvel facility will be up and running by next Diwali,” H-Energy Managing Director and Chief Executive Officer (CEO) told ETEnergyworld. The company is setting up the Jaigarh terminal in two phases. The first phase of the project – consisting of a jetty-based Floating Storage & Regasification Unit (FSRU) of 4 million tonne per annum (MTPA) capacity — is already operational. In the second phase, a land-based terminal of 8 MTPA capacity is being planned. H-Energy has also started work on laying a tie-in pipeline from Jaigarh to Dabhol which will carry regasified LNG from the terminal to the natural gas grid of GAIL (India). The 60 Km tie-in pipeline will carry re-gasified LNG to natural gas grid of GAIL in Dabhol. Hiranandani said the 60 Km tie-in pipeline is expected to be complete in two months, effectively kicking off operations by next year, and helping the company extend gas supply to natural gas consumers located in key demand regions. Also, the company is working on laying a 635 Km pipeline from Jaigarh to Mangalore, to connect to natural gas consumers in the east part of the country. “We are currently working with National Highways Authority of India (NHAI) as the alignment of the pipeline is along the highway. We have received Right of Use (ROU) from them. Their work and our work has to go in parallel. We are waiting for their processes to complete and, in the meantime, we will finish our processes. We are hoping to start work in June next year,” Hiranadani said. He also informed the work on the second LNG terminal being planned to be set up by the company at Digha in West Bengal is likely to start in December. That project will be based on a mixed model with both floating and on-land facility for LNG regasification. The company’s investment plan of around Rs 4,500 crore for setting up the LNG terminals and the pipelines is on track, Hiranandani said. Petronet LNG Ltd (PLL), the country’s largest importer of natural gas, is also planning to launch around 20 LNG fuelling stations on a 4,000-Km route between Delhi and Thiruvananthapuram as part of a larger plan being worked upon with oil marketing companies and state road transport authorities of Rajasthan, Gujarat and Kerala. PLL expects around 2 lakh trucks to run on LNG every year in the near future. LNG, a cleaner option than conventional fuels, is seen to provide 30-40 per cent lower running costs.
Oman’s 2019 crude oil premiums rise on financing costs: Sources
Oman crude oil sellers have locked in higher premiums for 2019 supplies than the previous year on the back of higher financing costs, several trade sources said on Friday. Oman cargoes with a 0.2 per cent operational tolerance were sold at premiums of about 5 cents a barrel above the official selling price (OSP), against premiums of about 4 cents from the previous year, they said. The rise in outright prices and higher interest rates have increased financing costs for traders when they purchase Oman on the Dubai Mercantile Exchange, the sources said. The higher premiums for Oman were also indicative of expectations of lower supplies from Iran next year as U.S. sanctions hit Tehran’s exports, one of the sources said. The International Energy Agency said in its monthly report on Friday that Iran’s supply has dropped to a two-and-a-half year low in September. Talks were ongoing for cargoes with a 5 per cent operational tolerance, the sources said. Some of the sources expected deals to be done at premiums of 14-15 cents a barrel although an upstream company may have sold its supplies at premiums higher than 15 cents. For 2018, Oman cargoes with a 5 per cent operational tolerance were sold at premiums of 10-12 cents.
India will continue to buy Iranian crude in Nov; payment mechanism to be worked out: S C Garg
India will continue to buy Iranian crude to some extent and the quantity of imports will not be the same, India’s economic affairs secretary Subhash Chandra Garg said in an interview to news channel CNBC-TV18. Garg conveyed oil minister Dharmendra Pradhan’s decision to continue oil imports from Iran. Pradhan had said in a press event earlier this week that two state-owned refiners have placed orders for importing crude oil from Iran in November. Responding to a query on India’s decision to buy Iranian crude post November despite US sanctions, a senior petroleum ministry official said: “We need to look at our energy needs too.” The government’s stand comes amid increased pressure from the US on major oil importing countries to cut their respective crude oil imports from Iran to zero from 4 November. Reacting to India’s stand to continue imports of Iranian crude, US State Department spokesperson Heather Nauert today said: “India’s decision to continue buying oil from Iran after November 4 and purchase the S-400 Triumf air defence system from Russia is “not helpful” and the US is reviewing it very carefully.” Noting that she has seen reports of India’s decision, she said this was a topic of conversation with the Indian government when Secretary of State Mike Pompeo was in India last month for the first 2+2 Dialogue. “The President had addressed it – I believe it was just earlier today – which he was asked about that question about whether or not India would buy oil from Iran after sanctions are reimposed. And the President said – and I’m not going to get ahead of the President, certainly – but he said we’ll take care of that,” she said. US special representative for Iran Brian Hook is currently in India to further discuss US foreign policy towards Iran. US had in May walked out of the Joint Comprehensive Plan of Action with Iran and re-imposed economic sanctions on the country. The sanctions prohibit other nations to enter into new contracts with Iran immediately and provide a six-month period ending 4 November to wind-down existing commitments with the country, especially with Iranian oil companies. India’s oil imports from Iran in the first five months (April to August) of the current financial year increased 43.69 per cent to 13.32 MT as compared to 9.26 MT imported in the corresponding period a year ago, data sourced from the Directorate General of Commercial Intelligence and Statistics, an arm of the ministry of commerce and industries, showed. India meets over 82 per cent of its crude requirement through imports. Around 10-12 per cent of these shipments are sourced from Iran. Indian refiners prefer Iranian crude owing to better pricing and credit terms. The 3-month credit period offered by Iran results in lower working capital for domestic Indian refiners leading to lower borrowings and increased floating money.
World oil market “adequately supplied for now”, says IEA
Oil markets look “adequately supplied for now” after a big production increase in the last six months, but the industry is coming under strain, the West’s energy watchdog said on Friday. The International Energy Agency said in its monthly report that the world’s spare oil production capacity was down to 2 per cent of global demand, with further falls likely. “This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the Paris-based organisation said. Members of the Organisation of the Petroleum Exporting Countries (OPEC) and other exporters such as Russia agreed in June to raise output as the market appeared increasingly tight. The price of global benchmark Brent crude has risen from around $45 a barrel in June 2017 and peaked at over $85 this month on bullish bets by speculators. OPEC, Russia and others such as US shale companies had increased production sharply since May, the IEA said, raising global output by 1.4 million barrels per day (bpd). Overall, OPEC had boosted production by 735,000 bpd since May as West Asian producers such as Saudi Arabia and the UAE more than compensated for declining output in Venezuela and Iran, which is facing US sanctions from next month. Supply from Iran during September dropped to a two-and-a-half year low, the IEA said, as customers continued to cut back in the run-up to new sanctions, which start on November 4. Iranian output fell to 3.45 million bpd, it said, down 1,80,000 bpd month-on-month. Iranian oil exports in September fell to 1.63 million bpd, down 800,000 bpd from recent 2Q18 peaks, the agency estimated. “The decline may deepen significantly ahead of US sanctions—and subsequently as final cargoes are delivered,” said the IEA, which advises major oil consumers on energy policy. Strong output But, the outlook for world oil consumption is faltering, the IEA said as it cut its forecast of global oil demand growth by 0.11 million bpd for both this year and next to 1.28 million bpd and 1.36 million bpd respectively. “This is due to a weaker economic outlook, trade concerns, higher oil prices,” it said. OECD commercial stocks rose by 15.7 million barrels in August to 2.854 billion barrels, their highest level since February, on strong refinery output and liquefied petroleum gas restocking, the IEA said. It added that OECD inventories were likely to have risen by 43 million barrels in the third quarter, the largest quarterly increase in stocks since the first quarter of 2016. “The increase in net production from key suppliers since May of approximately 1.4 million bpd, led by Saudi Arabia, and the fact that oil stocks built by 0.5 million bpd in 2Q18 and look likely to have done the same in 3Q18, lends weight to the argument that the oil market is adequately supplied for now,” the IEA said.